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Herbalife’s Earnings Are Expected to Fall in 2Q17

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Herbalife’s Earnings Are Expected to Fall in 2Q17 PART 3 OF 3

Herbalife: Analysts’ Recommendations and Target Price

Ratings and target price 

Most of the analysts covering Herbalife (HLF) stock maintained a “neutral” outlook. The company’s top line is expected to fall in 2Q17 due to lower volumes. Continued challenges in North America and softness in Mexico and China (FXI) will likely remain a drag on the company’s sales performance. However, the company’s strategic sourcing, retail price increases, and the self-manufacturing process will supplement its margins.

Analysts maintain a score of 2.4 on Herbalife stock on a scale of one (strong buy) to five (strong sell). Of the five analysts covering Herbalife stock, 40% recommended a “buy” and 60% maintained a “hold.” As of July 20, 2017, Herbalife stock was trading at $70.69, which reflects an implied upside of 24.8% to analysts’ 12-month target price of $88.25 per share.

Herbalife: Analysts&#8217; Recommendations and Target Price

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Peer comparisons

Of the ten analysts covering Vitamin Shoppe (VSI), 10% rated the stock as a “buy,” 70% rated it as a “hold,” and 20% maintained a “sell” rating. Meanwhile, 42% of the analysts covering Nu Skin Enterprises (NUS) maintained a “buy” on the stock, 29% rated it as a “hold,” and 29% rated it as a “sell.”

Valuation summary

As of July 20, 2017, Herbalife stock was trading at a 12-month forward PE (price-to-earnings) multiple of 15.2x. Currently, the company is trading cheaper than the S&P 500 Index’s (SPX) forward PE ratio of 18.2x. However, the company’s current valuation multiple is higher than its peer group average of 13.8x. Herbalife’s peers including Vitamin Shoppe, Nu Skin Enterprises, and Usana Health Sciences (USNA) were trading at forward PE multiples of 19.9x, 6.8x, and 14.6x, respectively.

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