Herbalife Hits 52-Week High - Analyst Blog

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Shares of Herbalife Ltd ( HLF ) 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.

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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 product retailers USANA Health Sciences Inc. ( USNA ) and Nu Skin Enterprises Inc ( NUS ) 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 list.

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 Conns Inc. ( CONN ) which holds a Zacks Rank #1 (Strong Buy).

CONNS INC (CONN): Free Stock Analysis Report

HERBALIFE LTD (HLF): Free Stock Analysis Report

NU SKIN ENTERP (NUS): Free Stock Analysis Report

USANA HLTH SCI (USNA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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