Herbalife (HLF) In A Perilous Reversal

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Herbalife ( HLF) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Herbalife as such a stock due to the following factors:

  • HLF has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $113.4 million.
  • HLF has traded 223,763 shares today.
  • HLF is down 14.6% today.
  • HLF was up 6.6% yesterday.

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More details on HLF:

Herbalife Ltd., a nutrition company, sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products worldwide. HLF has a PE ratio of 11.3. Currently there are 3 analysts that rate Herbalife a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Herbalife has been 1.9 million shares per day over the past 30 days. Herbalife has a market cap of $4.6 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 3.06 and a short float of 40.4% with 12.01 days to cover. Shares are down 33.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Herbalife as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. 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 ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.3%. Since the same quarter one year prior, revenues slightly increased by 7.1%. 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.
  • The gross profit margin for HERBALIFE LTD is rather high; currently it is at 52.19%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.15% is above that of the industry average.
  • HERBALIFE LTD' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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 increased its bottom line by earning $4.91 versus $3.95 in the prior year. This year, the market expects an improvement in earnings ($6.25 versus $4.91).
  • 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 16.5% when compared to the same quarter one year ago, dropping from $143.16 million to $119.53 million.
  • Net operating cash flow has decreased to $156.93 million or 26.60% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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