Vitamin Shoppe: More Good Times Ahead

Jun.29.10 | About: Vitamin Shoppe, (VSI)

Vitamin Shoppe (NYSE:VSI) is a retailer of nutritional supplements with over 400 locations in 37 states, making it one of the leading providers of vitamins, nutritional supplements, and minerals in the US, providing around 8,000 different product supplements through its retail locations, and offering another 20,000 different skus of supplements through its online retail website.

With everyone wanting to feel and look better in the United States, things are going very well for this company. EPS and sales growth have especially been doing very well recently and the good times are expected to continue for the next couple of years.

EPS growth, YOY, for the past eight quarters have seen some very strong gains of 167%, 40%, (-60%), 21%, 100%, 14%, 450%, and 88%. Sales growth during that time has been extremely steady at 15%, 12%, 9%, 12%, 12%, 11%, 13%, and 11%. Earnings estimates for 2010 and 2011 are for expected gains of 90% and 30%.

With a cash flow of $1.38 and 0% debt, along with the EPS and sales numbers, it is no surprise that management still owns 57% of the shares outstanding. There are also 44 mutual funds that own this stock as of March 2010. Clearly the big boys and the smart money are interested in the numbers this company is putting up on the big board of the NYSE.

While these fundamental numbers are great, it is also very important to know what this stock is doing technically and how its group is acting. For those of us that have studied our history, we know that part of a stock's move is directly correlated to how the industry group is acting. On the sector level, the Retail-Specialty store group only has a few other strong stocks on a RS (Relative Strength vs. the SP 500) basis. Perfumania Holdings (NASDAQ:PERF), Ulta Salon Cosmetics & Fragerances (NASDAQ:ULTA), Dreams Inc. (NYSEMKT:DRJ), and Jo Ann Stores (NYSE:JAS) are doing relatively well but the rest of the group is showing some weakness.

That could change if the market starts trending higher again in the intermediate term as there are other stocks in the group with strong fundamentals like Petsmart (NASDAQ:PETM), Sally Beauty Holdings (NYSE:SBH), Sothebys (NYSE:BID), Gaiam Inc. (NASDAQ:GAIA), Iparty (NYSEMKT:IPT), and Luxottica Group (NYSE:LUX).

However, no matter what these other stocks do, with Vitamin Shoppe being in the top 1% of all stocks based on current EPS ratings (this is proprietary data from Investor's Business Daily), and having great technicals of its own, it is safe to say I want to get long this stock on any low volume pullback to the 50 day moving average or breakout from a sound base on strong volume.

Currently, Vitamin Shoppe is in a very strong uptrend and has been after a heavy volume breakout from a well formed base-on-base pattern on April 20, 2010. Since then, it has rallied higher on strong volume while pulling back on lighter volume, finding strong support three times at the 50 day moving average. It has, once again, broken out to a new 52-week high on very strong volume this past Friday and if it can pull back here on lower volume to either the pivot point (around the 27.30 to 27.50 area) of the last breakout or the 50 day moving average, I would love to get long this wonderful growth stock.

If the market decides to start selling off on higher volume and Vitamin Shoppe decides to pull back on heavier volume and fails to stop at the 50 day moving average, being a disciplined and well studied investor, I will wait for another sound base to be made and re-evaluate the scenario for a possible purchase of this great growth story.
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Disclosure: No Positions