10 Undervalued Stocks to Invest in According to Goldman Sachs

7. e.l.f. Beauty, Inc. (NYSE:ELF)

Forward P/E ratio: 17.84

Number of Hedge Fund Holders: 35

e.l.f. Beauty, Inc. (NYSE:ELF) is a cosmetics company that offers affordable, high-quality beauty products across various categories, including makeup, skincare, and tools. Known for its value-driven approach, ELF targets a broad consumer base with products that focus on innovation, clean ingredients, and sustainability. The company sells its products through multiple channels, including e-commerce, retail stores, and third-party distributors. ELF emphasizes inclusivity and a strong digital presence, using social media and influencer partnerships to engage with its customer base. Its business model is built around affordable pricing, efficient production, and a focus on expanding its product offerings to meet evolving beauty trends.

e.l.f. Beauty, Inc. (NYSE:ELF) has demonstrated remarkable growth with a 30% net sales CAGR over the last 6 years, projecting $1.3 billion in net sales for the current year. The company has achieved consistent growth, being one of only 6 out of 546 consumer public companies that have grown for 24 consecutive quarters, averaging at least 20% sales growth. In color cosmetics, ELF holds the first position by unit share and is the second dollar-share brand with clear leadership potential given its growth profile. The company has successfully diversified its business, with skincare now representing almost 20% of its business, and international operations also accounting for nearly 20%, up from 10% just a few years ago.

e.l.f. Beauty, Inc. (NYSE:ELF)’s international business has been growing at a 55% CAGR over the last 5 years, though penetration remains at only 18% compared to global peers at 70%, indicating significant growth potential. The company maintains strong financial health with net debt to adjusted EBITDA at less than 1x leverage, while continuing to reinvest in infrastructure, working capital, distribution capacity, and technology. Looking forward, management projects strong net sales growth between 27% to 28% and adjusted EBITDA growth between 23% to 25% for 2025, with opportunities to double their business through expansion in cosmetics, skincare, and international markets. With a forward P/E ratio of 17.84, ELF is one of Goldman Sachs’s undervalued stocks.