Company Spotlight - Herbalife: |  - Co. Spotlights available via RSS feed
| Good For You And Good For Profits |  
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| | HLF | $40.47 | The Good: Expanding in a down economy; global reach.
The Bad: Stock is up 267% in less than a year.
The Beautiful: Earnings will dip only slightly this year, then ready to resume strong growth; outstanding Return on Equity. | P/E | 14 | | PSR | 1.13 | | ROE | 59 | | Debt/Eq. | .95 | | Div. Yield | 2.0% |
January 29, 2010 - Herbalife, Ltd. (HLF-NYSE) a network marketing company, sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide. It offers science based products in four principal categories: weight management, targeted nutrition, energy/sports and fitness, and outer nutrition.
The company's weight management product portfolio includes meal replacement shakes, weight-loss enhancers, appetite suppressors, and a range of healthy snacks.
Its targeted nutrition products comprise dietary supplements, which contain herbs, vitamins, minerals, and natural ingredients that support well-being and long-term good health. Herbalife's energy/sports and fitness products category includes energy and isotonic drinks to support a healthy active lifestyle.
Its outer nutrition products include skin cleansers, toners, moisturizers and facial masks, shampoos and conditioners, anti-aging products, body-wash items, and a selection of fragrances for men and women.
The company also sells literature and promotional materials, including sales aids, informational audio tapes, videotapes, CDs, and DVDs designed to support its distributors' marketing efforts, as well as start-up kits for new distributors. It sells through a network of independent distributors, as well as retail stores and a sales force in China. The company was founded in 1980 and is based in Grand Cayman, Cayman Islands.
In 2009 the company may have its first down year in earnings since it went public in 2004. That year earnings were a negative 27 cents a share. But then they jumped to $1.28, followed by $1.92 and $2.63. In 2008, they were $3.36. Consensus from the 5 analysts covering the stock is that 2009 finished at $3.23 (earnings will be announced on February 23...quarterly total should be 91 cents vs 94 cents in the last quarter of 2008). For 2010, they see a bounce to $3.70. With an earnings record like that, you can see why the stock went from $14 to $51.10 in 4 years.
But then it fell, hard. The stock plummeted to a low of $12.10 in March of 2009 before it started to rebound. It rocketed back to $44.40 by January of this year, up 267% in less than 10 months. Investors forgave its slight dip in revenues and profits and looked ahead. This is what they see.
Even with a tough economy, the company is doing well. Volumes picked up in the September quarter as did distributor demand. In the latter part of 2009, the company held more distributor events around the world leading to an increase in orders. The company cut costs, reduced staff, restructured how people were paid, and took a more efficient approach to vendor management. For the entire year, in spite of global economic distress, it looks like sales and earnings will only drop about 3%.
2010 looks like an expansive year for HLF. It's already in 72 countries but plans to add more. Its recent forays into Vietnam and Paraguay have potential customers of 100 million. The company wants to add another 6 countries in 2010. Most likely it will keep the same expansion pace for the foreseeable future. One country, China, represents a good example of how the company expands. It already has 11 licenses to sell products. It's seeking 5 more. Part of the reason is the expansion of nutrition clubs, now numbering close to 600.
Another reason for optimism: the company is focusing on daily consumption products, sold at nutrition clubs, which have a lower price point. That makes them more attractive to low-income consumers.
More numbers: Market cap is $2.47 billion. Forward P/E is 11. Price to book is 7.4. Book value is $5.55. Operating margin for the last 12 months was 12.65%. Profit margin was 8.22%. Return on equity was an outstanding 59.21%. Total revenues for the last 12 months were $2.21 billion. Total cash is $215.40 million or $3.54 a share. Total debt is $312.34 million, about 48% of capital. Current ratio is 1.30. Beta is a very high 1.91. There are 60.90 million shares outstanding with a float of 59.36 million. Insiders own 1.47%. Institutions have 88.6%. There is a dividend of 80 cents a year for a yield of 2%.
Herbalife has a lot of good going for it. Investors love it. Earnings should be back on track this year. If the global economy is gaining traction, analysts' estimates may be low. But most of that optimism seems baked into the price of the stock at $40 a share. Still, if there's a pull back in the stock, this is a good one to have on a watch list because it delivered outstanding earnings for several years and appears to be positioned to continue that trend. - Company Web site: www.herbalife.com - Ted Allrich |
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