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Herbalife: Analysts’ Recommendations after 2Q17

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Ratings summary and target price 

Most of the analysts covering Herbalife (HLF) stock continue to maintain a neutral outlook. However, given the company’s weak sales performance and bleak near-term outlook, analysts might downgrade the stock. Herbalife is facing challenges in several key markets. Implementation of the Federal Trade Commission’s regulation in the US and softness in Mexico and South and Central America will likely restrict its top-line growth. Its 3Q17 EPS (earnings per share) is projected to fall on a YoY (year-over-year) basis following the shift in the timing of expenses.

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Analysts have a score of 2.4 on Herbalife stock on a scale of one (“strong buy”) to five (“strong sell”). Of the five analysts providing ratings on Herbalife stock, 40% maintained a “buy” and 60% recommended a “hold.” Currently, the company is trading 28.2% below analysts’ target price of $88.25 per share.

In comparison, of the seven analysts covering Nu Skin Enterprises (NUS) stock, 42.0% recommended a “buy,” 29.0% maintained a “hold,” and 29.0% recommended a “sell.” Meanwhile, 10.0% of the ten analysts covering Vitamin Shoppe (VSI) stock recommended a “buy,” 70.0% maintained a “hold,” and 20.0% recommended a “sell.”

Valuation summary

As of August 1, 2017, Herbalife stock was trading at a 12-month forward PE (price-to-earnings) ratio of 13.4x. The company’s current valuation multiple is lower than the S&P 500 Index’s (SPX) forward PE ratio of 18.1x. Meanwhile, the company is trading at par with the peer group average. Herbalife’s peers including Vitamin Shoppe, Usana Health Sciences (USNA), and Nu Skin Enterprises were trading at a forward PE ratio of 6.3x, 140x, and 19.5x, respectively, as of August 1.

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