NEW YORK (TheStreet) -- Herbalife (HLF) - Get Report shares are up by 12.24% to $38.65 in late afternoon trading on Wednesday, after a court ruled that a lawsuit filed against the company claiming that it was a pyramid was without merit and dismissed the case today.

The class action lawsuit against the weight-loss and nutritional product manufacturer claimed that the company inflated its stock price by fraudulently claiming that it was a legitimate company.

Questions about the company's legitimacy were first popularized by activist investor Bill Ackman and his Pershing Square Capital Management firm, who began campaigning against the company after revealing that he had a $1 billion bet against Herbalife.

Herbalife's critics claim that its profitability is tied more to how many people it can recruit as distributors rather than how much product it sells.

"Just as black swans may exist, there may theoretically be some form of opinion that is factual or revelatory in nature such that it qualifies as a corrective disclosure. Such an opinion would need to reveal to the market something previously hidden or actively concealed. That is not this case," wrote U.S. District Judge Dale Fischer of his decision to dismiss the case.

Separately, TheStreet Ratings team rates HERBALIFE LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate HERBALIFE LTD (HLF) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• The gross profit margin for HERBALIFE LTD is rather high; currently it is at 53.23%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.11% trails the industry average.
• HERBALIFE LTD has improved earnings per share by 5.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HERBALIFE LTD reported lower earnings of $3.39 versus $4.91 in the prior year. This year, the market expects an improvement in earnings ($4.28 versus $3.39).
• HLF, with its decline in revenue, underperformed when compared the industry average of 8.3%. Since the same quarter one year prior, revenues fell by 10.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
• The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Personal Products industry. The net income has decreased by 16.4% when compared to the same quarter one year ago, dropping from $123.54 million to $103.29 million.
• Net operating cash flow has significantly decreased to $61.90 million or 68.39% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
• You can view the full analysis from the report here: HLF Ratings Report