Stock spotlight is a new weekly feature that will profile a notable, public company.
FOR THE RECORD:
: A caption for a photo with the Stock Spotlight column in the Feb. 25 Section A said customers were participating in an exercise session at an Herbalife health club in Artesia. In fact, the exercise session was in Torrance and was hosted by an independent Herbalife distributor. —
Headquarters: Los Angeles
Employees: 6,200 employees and 3.2 million independent distributors worldwide
Revenue: $4.1 billion in 2012
Net Income: $477 million in 2012
Stock Price: $36.79 at Friday's close
52-week range: $24.24 to $73
Annual dividend: $1.20 a share annually, a current yield of about 3%
P/E Ratio: $7.87, based on 2013 estimated earnings
The business: The company sells weight-loss, nutrition, hair- and skin-care products in more than 80 countries, utilizing independent distributors who profit from their own sales and sales from others they recruit into the business. Its top-selling product is cookies and cream flavor Formula 1, a high-protein, meal-replacement shake mix. Herbalife does very little mainstream advertising and does not sell products in retail stores. Instead it relies on a network of independent distributors who recruit customers, counsel them about nutrition and fitness and sell them products. The company recently agreed to a $44-million, 10-year deal to sponsor the Los Angeles Galaxy professional soccer team, one of many professional sports clubs it supports around the world.
The latest: Wall Street veterans say they've never seen a fight like this. Noted hedge fund managers Bill Ackman and
Accomplishments: The company reported record sales and profit in 2012 and said it expects things to improve in 2013. It has mountains of available cash, pays a decent dividend and repurchased 15 million — or more than 10% — of its shares in little more than a year.
Challenges: Herbalife shares have been extremely volatile in the last nine months, plunging more than 40% in the days after Ackman's attack, and falling 20% in a single day in May after hedge fund manager
Analyst opinions: Seven analysts have the stock as a buy or strong buy, while four have it as hold. The average one-year target price is about $58 a share.
Voices: "Our belief remains steadfast that Herbalife operates a perfectly legal multilevel marketing model that has proven particularly efficacious in the weight-loss category.... Herbalife's sustained growth and 30-plus year history in a highly regulated industry indicate a legitimate business [because] pyramid schemes are unsustainable." — Scott Van Winkle, analyst, Canaccord Genuity;
"Buckle up, it's going to be bumpy.... We are maintaining our overweight, but recognize that the stock is not for the faint of heart. We expect Mr. Ackman to continue to make noise on his short thesis, however, and for the potential for an FTC investigation to be an overhang on the stock for the indefinite future." — Brian Wang, analyst, Barclays Capital;
"It is clear that over time Herbalife is answering the questions that need to be answered and providing greater clarity around their business model — one that we see as simple but effective. We think it logical that, as these questions are finally answered to the investment community's satisfaction, the shares will trade, finally to the premium valuation we believe it deserves. The scarlet letter it wears today in the minds of the short seller community will be removed." — Timothy Ramey, analyst, D.A. Davidson & Co.