USANA Mentioned As Possible Take Over Target
by Ted Nuyten on July 25, 2012
As usual, one of the big factors in the growth of any industry is its relation to the still massive boomer generation, an aging market of over 60 million people who are taking health more seriously than they ever did before.
The nutritional supplements market will have this steady fire under it for at least another twenty years. But a growing health consciousness, fueled by increasing research and mass communication, has opened the door to every age level, and has helped nutritional supplements shoot well pass the $10 billion mark.
But there's another reason this is an industry important to consider, and it has nothing to do with good health. The fact is that Big Pharma is rapidly coming to a so-called "patent-cliff," as a record number of patents begin to expire and generic drug producers are allowed in to crash the party. Regulations and the cost of development have put the squeeze on new drug development as never before, and drug developers are looking for new opportunities.
Food and drug companies are beginning to buy up dietary supplement companies, partly for the revenue and partly to get rid of the competition.
Indeed the clout of the pharmaceutical industry in Washington has played a role in a wave of new restrictions on supplements, limiting what can be claimed about them. Nonetheless, these fast-growing companies are being increasingly viewed as tasty takeover targets, which, in the case of publicly traded companies, would represent a windfall for well-positioned investors.
Trading at around $40, USANA Health Sciences enters the healthcare sector with a market cap of about $600 million. Its niche is nutritional supplements and personal care products with global ambitions.
USANA Health Sciences has a price to earnings ratio of 11.65, a price to earnings growth ratio of 0.61 and a price to book of 3.15. It also has a robust return on equity of 31.03% and smart quarterly year-over-year revenue and earnings growth of 7.40% and 21.20%, respectively.
The company has no debt, which in this case, is why the company gets an "N/A" from Yahoo! Finance and a solid 2.01 for its current ratio. The stock pays no dividend and is undervalued 18.17% on a discounted cash flow basis.
Disclosure: I have no positions in USANA mentioned, and no plans to initiate any positions within the next weeks.
Source: Seeking Alpha