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HLF closed Wednesday trading at $43.63, down small with IV30™ down 3.2%. The Symbol Summary is included below.
Provided by Livevol
Conclusion
HLF is down 40% since it's peak in January of 2014, and while the headlines have been Bill Ackman vs. Carl Ichan, there's something else that's going on with the company... and that "something" may very well be driving the stock price.
HLF has the second worst net income shrinkage (one-year) and the second worst earnings margin % relative to peers.
We'll look at four financial measures, with trends and some peer comparisons, but here's the Pièce de résistance. The chart below shows HLF stock price is orange and net income (earnings) in blue.
Before we dig deeper into the financial measures, let's look at the stock chart from January 21st (stock peak in 2014) to the present.
Provided by Livevol
We can see the stock has had some ups and down, but bottom line: it's down 40% from its peak... and it ain't Bill Ackman and Carl Icahn that are moving the price over the long-term.
Total Revenue (TTM)
So this is a beautiful chart... and the one bulls will point to (quite rightly). Revenue growth has been spectacular and consistent... has it been too "consistent?
Net Income (TTM)
Earnings have been rising abruptly for HLF from essentially a break even firm back in 2005 to a firm with over half a billion dollars in net income. But... we see a down trend.
Now, these are trailing-twelve-month composites so the trend isn't so cut and dry. here are the last four quarters of net income from the most recent to the least, respectively.
Q2 2014: $120M
Q1 2014: $75M
Q4 2013: $126M
Q3 2014: $142M
So it's not a straight line, but the last two quarters are lower than any of the two quarters prior.
Net Income Margin %
This is a more indicative measure since the downtrend has lasted well over two-years. The bottom line is, HLF earnings margins are decreasing even though revenue are increasing.
Net Income vs. Net Income Margin %
So far everything we've looked at has been in a vacuum... which is to say, it has been focused on HLF alone. If we plot Net Income Margin % on the x-axis and Net Income Growth (1-year) on the y-axis, and allow the scatter to include HLF's peers, we see the problem. HLF has the second worst net income shrinkage (one-year) and the second worst earnings margin %.
Billionaires may agree to disagree... but a firm with shrinking earnings and poor margins doesn't need investors famous for being rich to do anything... it needs a turnaround in the company's operations.
This is trade analysis, not a recommendation.
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HLF's investors are buying up all the shares in the float. Once, the FTC clears HLF the investors will squeeze the hell out of ackman and shorts. Simple, right? Ichan, Soros, CRG, Fidelity, Stiritz ARE MASTERS IN THEIR TRADE
ReplyDeleteI agree! It's all about the FTC decision. The rest is just noise.
DeleteI agree. The FTC decision is all that really matters. The rest is just noise.
Delete