More and more analists recommend to buy Herbalife stock, seems short seller Bill Ackman is loosing this battle:
Shares of Herbalife (HLF) have declined by 22.9% over the past 12 months, primarily driven by investors' criticism on the company's multi-level marketing. At $43.59 per share, the stock has recently recovered significantly from its 52-week low of $24.24 reached in December 2012, and offers a dividend yield of 2.8%.
Despite the recent price recovery, I believe the stock is still trading at a considerably discounted level, which represents a great opportunity to accumulate shares. In this article, I will elaborate on my valuation analysis that supports my opinion.
From a relative valuation standpoint, Herbalife's valuation is significantly undervalued based on the company's solid financial performance relative to its peers' (see comparable analysis chart below). Sell-side analysts on average predict the firm's revenue, EBITDA, and EPS to grow at decent CAGRs of 10.7%, 10.9%, and 14.0%, respectively, over the current and next years. Those consensus estimates are fairly comparable to the averages of 6.7%, 10.0%, and 26.7%, respectively, for a group consisting of Herbalife's primary networking marketing peers.
The market expects Herbalife to experience a flat EBITDA margin performance over the same period, compared to the peer average expansion of 1.1%. On the profit side, most of Herbalife's profitability and capital return metrics are markedly above the par. The company's debt level is fairly in line with the group as reflected by its higher debt to capitalization ratio, but lower debt to EBITDA rate.
In terms of liquidity, Herbalife's free cash flow margin is slightly above the peer average. Due to the robust profitability, the company was able to maintain a healthy interest coverage ratio. Both the firm's current and quick ratios are only slightly below the par, reflecting a somewhat healthy balance sheet performance.
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Get more information, facts and figures about Herbalife, click here for the Herbalife overview.