(Bloomberg) -- Beauty is in the eye of the stockholder.
All eyes were fixed on E.l.f. Beauty when the Oakland, California-based cosmetics company made its debut on the New York Stock Exchange Thursday.
Shares in E.l.f. jumped to a high of $27.09 apiece in mid-morning trading -- up 59 percent from an already exuberant IPO price of $17, which was above a targeted $14 to $16 range.
Investors are clamoring for a piece of E.l.f., which has been backed by private equity firm TPG since 2014, partly because they are generally starved of new issuance in the cosmetics and personal care sector. Globally, just four such IPOs have happened this year, with E.l.f raising the most funds ($142 million) of the small cohort.
In a bid to boost their product range and overall sales, industry giants such as L'Oreal have been snapping up fast-growing candidates before they go public. In July, the French company paid $1.2 billion for IT Cosmetics. And back in 2014, it beat private equity buyers to a deal for NYX Cosmetics that valued the latter at a reported $500 million.
The success of the E.l.f. IPO bodes well for TPG, which stands to enjoy a lofty return if the stock holds its gains beyond a 180-day lock-up period. The IPO could also encourage owners of other closely held companies, such as Too Faced Cosmetics and Carver Korea, to tap public investors rather than get swallowed by a larger rival.
It's a good time to be in the $57 billion global cosmetics market. In the U.S., spending growth on personal care products is outpacing total spending growth. By contrast, spending growth on women's clothing has been declining.
And global cosmetics sales, in particular, are growing even faster than the general beauty and personal care industry.
The trend is global and cuts across income levels, from the lower-end and mass-market buyers E.l.f. targets to the higher-end luxury buyers, who may have pulled back on Prada bags but are reaching for Christian Dior cosmetics.
As Gadfly columnist Andrea Felsted points out, the "lipstick index" is relevant again -- referring to former Estee Lauder chairman Leonard Lauder's theory that women facing economic strain might cut back on expensive items but see beauty products as an affordable indulgence.
And luxury makeup shoppers are more likely than clothing shoppers to trade down every now and then. Even if a luxury consumer buys most of her makeup from Christian Dior, she still won't hesitate to pick up a $6 tube of mascara at the drugstore -- E.l.f.'s price point.
What's more, cosmetics are important to a generation documenting their every move on Instagram, Snapchat and other social media. As the L'Oreal CEO said earlier this year, the rise of the selfie was the best thing that ever happened to the company, as "no one will put an ugly picture on Facebook." And men are increasingly spending more on cosmetics and skincare, opening up another growth market.
E.l.f's net sales are growing at 20 times those of the mass cosmetics category, on average, but only represented 2.3 percent of the $8 billion U.S. mass category in 2015, according to the company's financial filings.
Of course, as with most things in fashion, E.l.f.'s products could always fall out of favor. But because the company began online over a decade ago, it has easier access to customer feedback than its brick-and-mortar counterparts, and it has a history of quickly adapting to changing tastes. Much as Zara and H&M approach fast fashion, E.l.f can launch a product in as few as 20 weeks from concept, a process that takes months longer at competitors.
IPO pops can disappear quickly, but E.l.f.'s gains might have some staying power.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the authors of this story: Gillian Tan in New York at gtan129@bloomberg.net, Shelly Banjo in New York at sbanjo@bloomberg.net.
To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net.