Why Jefferies Rated Nu Skin Enterprises a ‘Hold’

Nu Skin Enterprises (NUS) has a market cap of $2.3 billion. It fell by 0.22% to close at $41.26 per share on June 3, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 4.8%, 12.2%, and 11.3%, respectively, as of the same day. This means that NUS is trading 6.7% above its 20-day moving average, 7.3% above its 50-day moving average, and 13.3% above its 200-day moving average.

The Vanguard Small-Cap ETF (VB) invests 0.11% of its holdings in NUS. It tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%–15% of the investable universe. The YTD price movement of VB was 5.6% as of June 3, 2016.

The market caps of NUS’s competitors are as follows:

• Illumina (ILMN): $21.3 billion
• Herbalife (HLF): $5.6 billion
• Avon Products (AVP): $1.8 billion

Jefferies has initiated the coverage of Nu Skin Enterprises with a “hold” rating and set the price target at $41 per share.

Nu Skin Enterprises reported fiscal 1Q16 revenue of $471.8 million, a fall of 13.2% compared to $543.3 million in fiscal 1Q15. The company’s gross profit margin and operating income fell by 12.3% and 88.2%, respectively, in fiscal 1Q16 compared to the prior year period.

Its net income and EPS (earnings per share) fell to $3.3 million and $0.06, respectively, in fiscal 1Q16, compared to $36.3 million and $0.60, respectively, in fiscal 1Q15.

NUS’s cash and cash equivalents fell by 13.6%, and its inventories rose by 3.8% in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio fell to 1.65x, and its debt-to-equity ratio rose to 0.89x in fiscal 1Q16. That compares to a current ratio and debt-to-equity ratio of 1.73x and 0.82x, respectively, in fiscal 4Q15.

Nu Skin Enterprises has made the following projections for 2Q16:

• revenue of $560 million–$580 million, which assumes a negative foreign impact of ~4%
• EPS of $0.75–$0.79

The company has made the following projections for 2016:

• revenue of $2.16 billion–$2.20 billion, which assumes a negative foreign impact of 4%–5%
• EPS of $2.29–$2.49, or $2.65–$2.85 excluding non-cash Japanese customs charge of $0.36 per share

In the next part, we’ll take a look at JM Smucker.