My regular readers know that I get quite a few ideas by looking at the top insider buys when I read Barron's cover to cover on weekends. In this week's edition, Herbalife (NYSE:HLF) came in at the No. 2 position and the stock looks as if it is significantly undervalued.
Herbalife is a network marketing company and sells weight management, nutritional supplement, energy, sports and fitness, and personal care products worldwide.
Here are nine reasons why HLF is a buy at $45.50 a share:
- An insider made several purchases totaling over $3 million in November. They were the first purchases since mid-May.
- The stock yields 2.6% and has tripled its payouts over the past three years. Its payout ratio is still only around 30%, so additional dividends could be forthcoming.
- In addition, the company approved a five-year $1 billion stock buyback plan in July that would take approximately 20% of the float off market at the current stock price.
- The eight analysts who cover the stock have a median price target of $77.50 on HLF, more than 50% above the current stock price.
- The company has increased revenue by 11% annually over the past five years. Double-digit revenue gains are expected in FY 2012 and FY 2013 as well. The stock has a five-year projected PEG of under 1 (0.77).
- Fast-growing Asia and Latin America account for around 60% of total global sales.
- The company has beat earnings estimates for 12 straight quarters. The average beat over consensus the last four quarters has been north of 11%.
- Consensus earnings estimates for both FY 2012 and FY 2013 have moved up over the past two months.
- The stock has good medium-term technical support at these levels (see chart below).
Click to enlarge image.