On Monday, the quiet period for e.l.f. Beauty's recent initial public offering will expire, and when it does, analysts at the IPO's underwriters, which include J.P. Morgan, Morgan Stanley and Wells Fargo, will be allowed to release detailed research reports and ratings on the stock.
These reports are likely to be positive because e.l.f. Beauty has strong fundamentals and management, and had a highly anticipated IPO where shares priced above their range and moved higher. Such positive reports, combined with the clout that analysts at these large banks have, should boost the stock.
Strong Fundamentals and Management
The "e.l.f" in this company's name stands for "eyes. lips. face." It markets budget beauty products through a wide variety of retailers and through its own website. The biggest retailers selling its cosmetics include Target, Walgreens and CVS Health.
e.l.f. Beauty's financials have been impressive. The company posted a net profit of $4.4 million in 2015. In 2015, earnings before interest, taxes, depreciation and amortization were $32 million, on revenue of $191 million.
The company's management team is impressive and experienced. CEO Tarang Amin had significant experience in consumer products before joining the company in 2014, including executive stints at Clorox, Procter & Gamble and Schiff Nutrition. CFO John Bailey joined e.l.f. Beauty in August 2015. He previously led the consumer sector at TPG Growth, the private equity company that acquired a majority stake in e.l.f. Beauty in 2014.
Strong IPO Pricing and Performance
Shares of e.l.f. Beauty had a strong debut, pricing at $17, above the IPO's initial range of $14-$16. They then jumped 56% during their first day of trading. The stock closed Thursday at $27.05.
e.l.f Beauty is backed by a large and powerful team of underwriters led by J.P. Morgan and Morgan Stanley. Other underwriters include Piper Jaffray, Wells Fargo, William Blair, Cowen, BMO, Stifel and SunTrust Robinson Humphrey.
Investors should buy shares right now. When analysts at those investment banks begin releasing their research reports and ratings next week, the stock should rally, and then investors can sell their shares at a nice profit.