Friday, November 14, 2014

* Herbalife (HLF) - 4 Stunning Charts and Baffling Corporate Behavior


Share on StockTwits





Provided by Capital Market Laboratories




Conclusion
HLF is in trouble.  I had an article republished on Business Insider on October 3rd (well before the most recent earnings announcement). Allow me to quote myself:

-------
"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."
-------

Well, there was no turnaround.  The firm's net income has fallen 40% and the best way it has found to re-invest into the business... drum roll please... is to buy back it's own stock at peak levels?... Hmm...

Let's take a look at a company struggling and then some behavior that is... well, let's just say worth a closer look.

Revenue (TTM)
So this first chart looks great.  The firm is growing its revenue base... this is a good chart, right?

Provided by Capital Market Laboratories

Net Income (TTM) vs. Revenue (TTM)
I have now charted revenue as a red line, and the blue bars are net income.  You see the problem here... The revenue rise is slowing but the earnings move is now negative.

Provided by Capital Market Laboratories


Year-over-Year Changes in Revenue and Net Income (TTM)
Take those first two charts together and look at annual changes, we see in the blue bars how quickly net income is dropping and, in the rd line, we can see how the growth in revenues is slowing.

Provided by Capital Market Laboratories


Stock Repurchases vs. Net Income
The blue bars are stock repurchases by HLF (the firm buying its own stock) over total assets, while the red line is net income (earnings).  We can see that the rate of stock buybacks is up ~500% as net income has fallen by ~40%.  Umm... hello?

Provided by Capital Market Laboratories


Stock Buybacks vs Stock Price
Stock repurchases are reported on the financial statements but occur prior to the filing date.  HLF was buying its own stock back right around the peak of that orange line (stock price).  The goal was to prop up the stock -- the result was nothing... the stock collapsed 50%

Provided by Capital Market Laboratories




This is trade analysis, not a recommendation.






Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

No comments:

Post a Comment