A few thoughts on Herbalife

If you follow me on any one of a few social media sites like Facebook, Twitter, Instagram, or Foursquare, you’ll notice a majority of my activity is spent at a local nutrition club. Because of the company policy I can’t tell you which one, but I can tell you “Nutrition Club” = Herbalife Club. I’ve been a pretty big proponent of the products for a while and this is company that has been on my watch list since January of this year. The problem with it has been the massive ego war over whether or not it’s a pyramid scheme and that did a lot of damage to it’s stock price. Now that the dust has cleared though, I’d like to revisit the company with how it looks now. If you’re interested in a little reference point here is the blog post I did back in January about the company (so compare it from then till now):

http://dkricht.blogspot.com/2013/01/v-behaviorurldefaultvmlo.html

So, that all being said, where are we at now? Well here’s their current chart:

hlf current
So when you compare this one to the chart from back in January you can see the huge hit it took to its stock price. However from the time of my last article on the subject the stock has gone up about $12/share, which is a nice profit if you ask me. The big question is what else has changed to result in this huge $20/share gain since mid January?

So let’s take a look at what’s different:
– The Market Cap is about 900 million dollars higher than in February
– The Return on Equity has jumped from 99.99% to 138.8%
– There is an additional 400 million in revenue which lead to an increase in net income of        about 20 million
So those are some nice positives, but it is important we don’t only focus on them so here a few things that have gotten worse since January:
– The amount of free cash flow has dropped by about $10 million
– The Debt/Equity ratio has doubled
– The Profitability has dropped a small amount since then.
I think when we look at those, the Pros far outweigh the Cons, and those coupled with the Ackman/Ichann fight seemingly over it looks like this company gets to get back to the business of making money which is good news for you at home. Even at this price, I think Herbalife ($HLF) is a good buy. The stock is likely to go up another $4 – $5 a share from what I can gather and with the 2% dividend, it looks like a fine long term option.

I do not currently have a position nor do I plan to open one in the next few days in Herbalife. I personally will likely wait until later in the year for a pullback and try to jump in around the $50 range (because I’m cheap).

Finally I wanted to apologize for the lack of updates lately. I was on vacation for a chunk of June, and between my two year old and my job, I have been absolutely swamped and unable to make time to post anything. It is my hope I can start posting more regularly moving forward. Of course, I say that every time, don’t I?
-D

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