If Herbalife (HLF) traded only on fundamentals, there’s no telling how high it could go. It doesn’t, however, so investors need to weigh the pros and cons of investing in its shares, despite last night’s financial results.Bloomberg News
To recap: Herbalife beat fourth-quarter earnings and sales forecasts, and boosted its 2014 earnings guidance, despite weaker projected sales due to currency fluctuations. A big share buyback will do that.
Good results sure, but can they ever be good enough, what with William Ackman mounting a crusade against the multi-level market? Websush’s Rommel Dionisio and team assess the risks and rewards:
Broad-based fundamental growth still impressive, with core business and recruiting trends remaining strong, despite recent headlines. While shares of [Herbalife] continue to bounce around in the face of recent headlines as well as a negative publicity campaign being waged by a prominent short seller, we believe Herbalife's core fundamentals still remain strong, with double-digit growth seen in EMEA, South/Central America, and China, as well as high single-digit growth in the core North America region…
Given Herbalife's still strong core business momentum, partially offset by continued headline risk, we believe shares of [Herbalife] should trade relatively in line with its peer group. This generates a 2014E P/E multiple of 15x, resulting in our PT of $90.
Shares of Herbalife have dropped 3.5% to $66.53 at 2:44 p.m., while Nu Skin Enterprises (NUS) has dipped 0.1% to $79.99, Usana Health Sciences (USNA) has fallen 0.4% to $75.84, Avon Products (AVP) has gained 0.9% to $15.22 and Weight Watchers (WTW) has advanced 0.2% to $20.95.