) hit a 52-week high of $83.51 on Jan 8 and eventually closed at
$81.32. The increased momentum in the shares came after Herbalife
escaped the list of companies accused of false weight-loss
product claims by the Federal Trade Commission (FTC). In fact,
shares of this nutrition company have been rising after
Herbalife's new UK-based auditor PricewaterhouseCoopers (PwC)
announced a favorable re-audit of Herbalife's financial
statements on Dec 16.
The company's long-term estimated earnings per share (EPS)
growth rate is 15.32%. Average volume of shares traded over the
last three months came in at approximately 2,893K.
On Jan 7, CNBC reported that Herbalife was not included in the
list of companies investigated by the FTC for falsely advertising
weight-loss products. FTC is an independent U.S. government
agency, which protects consumers and eliminates or prevents
anticompetitive business practices. Like Herbalife, other health
USANA Health Sciences Inc.
Nu Skin Enterprises Inc
) came out clean in the investigation.
Last week, FTC had announced its plans to release the details
of companies who follow deceptive advertising practices for
weight loss products. The government agency did not name specific
companies, though CNBC confirmed that Herbalife was not on the
The news comes as a big relief to Herbalife, which has been
facing accusations since last year by activist investor William
Bill Ackman (hedge fund manager of Pershing Square) and the
Belgian consumer organization Test-Aankoop regarding its pyramid
scheme business model i.e. deceptive marketing practices employed
for improving business. The company was accused of making money
by recruiting new sales people and not from its sales. However,
on Dec 3, 2013, a Belgian court quashed the allegations and
stated that the company's sales model complied with Belgian law.
But it seems that Ackman continues to believe that Herbalife is
running a pyramid scheme business model.
Ackman sent a letter to its investors on Dec 24 about the
improper recruiting methods used by the nutrition company. The
billionaire investor also told his clients that Herbalife is
likely violating multi-level market restrictions in China. His
findings are currently with the regulators but would be disclosed
to investors very soon.
Herbalife, on the other hand, is going strong in terms of its
earnings and share price. In Dec 2013, Herbalife's UK-based
auditor PricewaterhouseCoopers (PwC) also completed the re-audit
of more than three years of financial statements and found no
material changes. The re-audit was done post PwC's appointment as
its new independent auditor. Herbalife's former independent
auditor, KPMG LLP ('KPMG') had resigned in May following insider
trading allegations against an executive of the accounting firm
and not owing to any discrepancies in Herbalife's financial
statements or its accounting practices. Herbalife holds a Zacks
Rank #2 (Buy).
Other Stocks to Consider
Another better-ranked retailer is
) which holds a Zacks Rank #1 (Strong Buy).
CONNS INC (CONN): Free Stock Analysis Report
HERBALIFE LTD (HLF): Free Stock Analysis
NU SKIN ENTERP (NUS): Free Stock Analysis
USANA HLTH SCI (USNA): Free Stock Analysis
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