Ulta Delivers 15th Beat in 16 Quarters as e.l.f. Profitability Crumbles

e.l.f. Beauty (NYSE: ELF) and Ulta Beauty (Nasdaq: ULTA) recently reported earnings revealing opposite trajectories. e.l.f. beat estimates with $0.68 per share versus $0.57 expected on November 5, yet the stock crashed over 20% that day. Ulta delivered its fourth straight double-digit beat on December 4 with $5.14 per share versus $4.60 expected, and shares held steady near analyst targets.

One Business Model Cracked Under Pressure. The Other Held Firm.

e.l.f. grew revenue 14.2% year-over-year to $343.9 million in Q2, but net income collapsed 84.8% to $3 million. The company posted an operating loss of $0.7 million despite a 69.4% gross margin. Selling, general, and administrative expenses hit $231 million, obliterating profitability. Management burned $37.9 million building inventory while operating margins compressed to 2.24% on a trailing basis. CEO Tarang Amin and other executives sold over $24 million in stock during September and October at prices between $130 and $150, weeks before the earnings report sent shares plunging to the $70s.

Ulta posted $2.9 billion in revenue, beating estimates of $2.7 billion, with comparable sales up 6.3% driven by higher ticket sizes and increased transactions. Net income held flat at $230.9 million, maintaining a 9.93% profit margin. Gross margin expanded to 40.4% from 39.7% a year earlier. CEO Kecia Steelman said results “exceeded our expectations, reflecting the steady progress and momentum our team is building.” Operating margin remained stable at 10.8%. Cosmetics represented 41% of sales, skincare and wellness another 24%. The company reaffirmed full-year guidance of approximately $12.3 billion in sales and $25.20 to $25.50 in earnings per share.

The Valuation Gap Tells the Real Story

e.l.f. traded at 58 times earnings with operating margins under 2.5%. That multiple typically belongs to high-growth software companies, not beauty manufacturers with razor-thin margins and slowing earnings. Return on equity sits at 8.77% while carrying $831.6 million in long-term debt against a $4.85 billion market cap. Ulta trades at 23 times earnings while generating a 48% return on equity and 10.8% operating margins. Ulta is 8.4 times larger by quarterly revenue yet commands a valuation multiple less than half of e.l.f.’s.

e.l.f.’s technical indicators remain weak. The relative strength index sits at 42.55, below the neutral 50 level despite recovering from an extreme oversold reading of 16.68 on November 7. The stock hit 88.28 RSI in early June when shares traded above $200, signaling severe overbought conditions before the collapse.

What Matters Next for Both Retailers

For e.l.f., watch whether the company can stabilize operating margins while managing inventory levels. The disconnect between revenue growth and profitability needs resolution. For Ulta, comparable sales momentum and Space NK integration will determine whether the company can sustain mid-teens earnings growth.

Key Differences Between the Two Retailers

Ulta offers stability with proven execution, having delivered its 15th earnings beat in 16 quarters while maintaining consistent margins. e.l.f. faces higher risk given insider selling before the crash, collapsing profitability, and stretched valuation. e.l.f. at $81 versus a $121 analyst target represents a 49% upside if management can prove the business model works at scale. Ulta’s predictable profitability and reasonable 23x P/E valuation contrast with e.l.f.’s 58x multiple and margin compression.