Why Herbalife (HLF) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Herbalife (HLF) are down -1.81% to $63.48 after it was reported that activist investor Bill Ackman "hasn't backed away from his real passion - trying to take down Herbalife, the nutritional supplements company he has bet $1 billion is a pyramid scheme," the New York Post reports.

Next week, Ackman will unveil the results of a nearly two year probe by his Pershing Square hedge fund into Herbalife nutrition clubs, the Post said.

The findings, according to Ackman, will show how the nutrition clubs - owned and operated by Herbalife's independent distributors - perpetuate the fraud.

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TheStreet Ratings team rates HERBALIFE LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HERBALIFE LTD (HLF) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 12.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, HLF's share price has jumped by 31.29%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HLF should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Personal Products industry and the overall market, HERBALIFE LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $190.65 million or 38.52% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 9.54%.
  • The gross profit margin for HERBALIFE LTD is rather high; currently it is at 51.55%. 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 5.91% trails the industry average.
  • You can view the full analysis from the report here: HLF Ratings Report

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