This article will present an analysis of GNC Holdings Inc. (GNC) and Nu Skin Enterprises Inc. (NUS), two beauty and wellness companies with large buyback programs, healthy dividends and more than enough reasons to validate a long-term investment.
GNC Holdings Inc.
GNC is a specialty retailer that sells health and wellness products through its three operating segments: Retail, Franchise, and Manufacturing/Wholesale. As of December 31, 2012, GNC had more than 8,100 locations and franchises in 54 countries. GNC has a market cap of $4 billion and had sales of $2.430 billion last year.
Recently, Goldman Sachs upgraded GNC from Neutral to Buy with a price target of $50.00, shares currently trade for $40.22. Currently, analysts have a mean price target of $49.78 and a median target of $48.00. The average estimated earnings per share for 2013 is $2.80 on revenue of $2.66 billion. Earnings per share for 2012 were $2.33 and the estimated revenue of $2.66 billion implies a 9% increase from 2012's revenue.
Here are some additional positives for GNC:
- Revenue increased 17.3% last year and the three-year growth average of 12.5% for GNC is significantly above the industry average of 5.5%.
- Price/Earnings ratio of 17.9 is well below the industry average of 42 indicating GNC is not being overvalued in comparison to its peers.
- Operating margin of 17.6%, net margin of 9.9% and ROE of 25.8% are all above the industry averages of 5.2%, 2.8% and 11.3% respectfully.
- On top of the new revenue generated from its new stores (142 domestic and 240 new international), same-stores sales increased 11.5% domestically and 15% internationally.
- For the first quarter of 2013, the Board declared a dividend of $0.15 representing a 36% increase over its prior dividend.
- The board has also authorized the repurchase of up to $250 million in common stocks during 2013, which represents approximately 6% of its current market cap.
Nu Skin Enterprises Inc.
Nu Skin Enterprises is a global direct selling company that develops and distributes personal care products and nutritional supplements under the brands Nu Skin and Pharmanex. Nu Skin is a $2.4 billion company that was founded in 1984 and now operates in 53 international markets and has over 946,000 active distributors worldwide.
Recently, Nu Skin's shares have dropped in what has been called a "sympathy play to Herbalife (HLF), as it operates a similar business." However, the Federal Trade Commission that is responsible for the Herbalife investigation has made no mention of Nu Skin. Emphasizing the unwarranted drop in share price, Deutsche Bank stated that Nu Skin remains one of its top pick in 2013 with solid growth prospects and compelling valuation. Analyst have a mean target price of $60.57 per share and a median target price of $60.00, both well above the current trading price of $40.53.
Additional positives for Nu Skin
- Nu Skin's P/E of 11.7, P/B of 4.1 and P/S of 1.2 are all below the industry averages of 19.8, 4.3 and 2.2 respectfully.
- Nu Skin's three-year revenue growth rate of 17.7% and its ROE of 38.1 are also above the industry averages 1.4% and 20.5% respectfully.
- Recently, Nu Skin announced that its 4th-quarter 2012 revenue was at a record $558.2 million, a 19% improvement over the prior-year period.
- Fully-year 2012 revenue of $2.17 billion was a 24% improvement year-over-year.
- 2012 earnings per share of $3.52 represents a 48% increase over 2011.
- In 2012, the company repurchased approximately $200 million of its outstanding shares, which is approximately 8% of its current market price.
- In 2013, the board announced plans to increase its 2013 dividends by 50% representing a 140% increase over the last three years. Nu Skin currently pays a dividend of 2.92%.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NUS over the next 72 hours.