Herbalife Stock Valuation Analysis (Herbalife News) – Is HLF Stock a Buy, Sell or Hold?

Is Herbalife stock (HLF) a good buy or sell? Herbalife recently reported its first quarter 2013 results, in which shareholders were treated to some really great news. Q1 net sales came in at $1.1B, a 17% increase from the same period last year. Year to date, Herbalife’s stock price has surged over 61.99% causing investors to question whether Herbalife stock is still a good buy or would this be a good time to sell the stock.

Herbalife Stock Chart – Stock Surges 61.99% Year to Date (YTD)

HLF - Stock Surges


In addition to the increase in Q1 sales, the firm's year-over-year earnings per share (EPS) also experienced a staggering jump, from $0.88 a year ago to $1.27 in the most recent quarter. According to a study released in May 2013 by research firm Nielson, 3.3% of US adults purchased Herbalife products within the past 3 months. This would put HLF's customer base at roughly 8M strong, including a 550,000-strong distributor network.

While all of this bodes well for shareholders, the company has had its share of scandals. In late May, the FBI investigated insider trading related to the company's shares. News of the investigation sent HLF's shares tumbling nearly 3.8% in early April. This came on the heels of an earlier high-profile scandal in late 2012, that likened Herbalife’s business model to a pyramid scheme.

Clearly, as indicated by the stock movement chart below, HLF is underperforming against its industry peers GNC Holdings (GNC) and Newell Rubbermaid (NWL). Given this situation, investors are right to question what the future holds for the stock and whether Herbalife stock (HLF) is a buy or sell.

Let's try and answer that question through our analysis below.

 Herbalife (HLF) Stock Analysis (Fundamental, Valuation and Stock Technical Analysis)

  1. Herbalife Fundamental Analysis
  2. HLF Comparable (Competitor) Valuation Overview
  3. Herbalife Stock Technical Analysis
  4. Favorable Catalysts for the Stock
  5. Bottom Line Conclusion (Buy, Sell or Hold HLF Stock)
  1. Fundamental Analysis

HLF is expected to report Q2 earnings in a few weeks. If Q1 was any indication of what's to come, shareholders are set for yet another stellar quarter. For the Q1 period, the company reported Y/Y sales growth, both in terms of volumes and dollar value, across all of its global/regional markets. Of key interest is the fact that, despite continued economic slowdown in emerging markets, HLF managed to show impressive performance in South & Central America (+28% Y/Y) and China (+24% Y/Y).

                      HLF Vs Competitors (Stock Price)


HLF delivered strong Q1 performance on every key Y/Y metric possible: Net Sales were up 17%, Sales volumes were up 13%, Cash Flow was up 14%, and EPS was up 25%. Based on these healthy numbers, management felt confident that it could do even better, and offered Q2 EPS guidance of between $1.14 and $1.18, while revising its full-year 2013 guidance of $4.45-$4.65 upwards, to $4.60-$4.80.

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So what do analysts think about the forthcoming quarter and beyond? On the EPS front, Wall Street's market consensus is for the firm to deliver EPS of $1.18 per share for Q2, and a further $1.16 for the subsequent quarter, Q3. On a full-year basis, analysts are also predicting that HLF will deliver $4.80 in EPS for 2013, with an EPS estimate of $5.48 for 2014.

On the revenue front, analysts are predicting that the company will improve on its $1.1B Q1 revenue in the forthcoming quarter, and deliver $1.2B in revenues for the next two consecutive quarters (Q2 and Q3). On a full-year basis, revenue estimates are pegged at $4.6B and $5.1B for 2013 and 2014 respectively. If these annual estimates are met, HLF will have seen 4 straight years of strong revenue growth.

Continue: Herbalife Valuation and Technical Stock Analysis