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Nu Skin Enterprises Receives Investment of $210 Million

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Price movement

Nu Skin Enterprises (NUS) has a market cap of $2.3 billion. It rose by 1.4% to close at $40.69 per share on June 15, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.4%, 7.0%, and 9.7%, respectively, on the same day.

This means that NUS is trading 1.9% above its 20-day moving average, 4.2% above its 50-day moving average, and 12.0% above its 200-day moving average.

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Related ETF and peers

The Vanguard Small-Cap ETF (VB) invests 0.11% of its holdings in NUS. The ETF 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 3.9% on June 15, 2016.

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

  • Illumina (ILMN) — $20.4 billion
  • Herbalife (HLF) — $5.5 billion
  • Avon Products (AVP) — $1.8 billion

Nu Skin Enterprises investment strategy

In a press release on June 15, 2016, the company noted, “Nu Skin Enterprises has entered into an agreement for a $210 million strategic investment from Ping An ZQ China Growth Opportunity Limited. Under this investment, Ping An ZQ China Growth Limited is purchasing $210 million in aggregate principal amount of 4.75%, four-year convertible senior notes with an initial conversion price of $46.50 per share.”

Nu Skin Enterprises will use the proceeds from this investment in repurchasing the common stock throughout the year and in investing in its China operations. It is expecting to report net revenue at the high end of, or slightly above, the guidance of $560 million–$580 million for fiscal 2Q16.

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Performance of Nu Skin Enterprises in fiscal 1Q16

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 ~1.7x, 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 ~1.7x and 0.82x, respectively, in fiscal 4Q15.

Projections

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

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

The company has made the following projections for 2016:

  • revenue of $2.16 billion–$2.2 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 Berry Plastics Group.

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