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Summary

  • 3 insiders sold Herbalife stock within one month.
  • The stock was not purchased by any insiders in the month of intensive selling.
  • 2 of these 3 insiders decreased their holdings by more than 10%.

Herbalife (NYSE:HLF) sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products worldwide.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Herbalife's insider activity during the last 30 days.

NameTitleTrade DateShares SoldOption Exercise & SaleRule 10b5-1Current OwnershipDecrease In Ownership
Patricio CuestaSVPJune 182,975NoYes8,643
shares + 63,536 options
4.0%
Richard BerminghamDirectorJune 1316,000YesYes24,753
shares
39.3%
John TartolDirectorMay 2150,000NoNo235,573 shares + 12,110 options16.8%

There have been 68,975 shares sold by insiders during the last 30 days. Patricio Cuesta, and Richard Bermingham sold their shares pursuant to a Rule 10b5-1 plan. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Herbalife's insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
June 201418,9750
May 2014300,0000
April 201400
March 201400
February 2014033,515
January 201410,9380
December 20131,9890
November 201300
October 201300
September 201300
August 20133880
July 201300
June 201300
May 20130611,354
April 201300
March 201302,339,980
February 201300
January 201300

There have been 332,290 shares sold and there have been 2,984,849 shares purchased by insiders since January 2013. The month of May 2014 has seen the most insider selling.

Financials

Herbalife reported the first-quarter financial results on April 28 with the following highlights:

Revenue$1.3 billion
GAAP net income$74.6 million
Cash$1.3 billion
Debt$1.8 billion

The three insiders sold their shares after these results.

Outlook

Herbalife's guidance is as follows:

Q2/2014FY2014
Net sales growth vs 201310.0%-12.0%10.0%-12.0%
EPS$1.51-$1.55$6.10-$6.30

Competition

Herbalife's competitors include GNC Holdings (NYSE:GNC). Here is a table comparing these two companies.

CompanyHLFGNC
Market Cap:6.37B3.22B
Employees:7,0006,100
Qtrly Rev Growth (yoy):0.120.02
Revenue:4.96B2.64B
Gross Margin:0.500.38
EBITDA:779.02M522.28M
Operating Margin:0.140.18
Net Income:483.28M262.28M
EPS:4.582.74
P/E:14.1912.93
PEG (5 yr expected):0.550.82
P/S:1.291.24

Herbalife is trading at a similar P/S ratio than GNC. In GNC, there have not been any insider selling since November 2013.

Conclusion

There have been three different insiders selling Herbalife, and there have not been any insiders buying Herbalife during the last 30 days. Two of these three insiders decreased their holdings by more than 10%. Herbalife has an insider ownership of 17.98%.

Before going short Herbalife, I would like to get a bearish confirmation from the Point & Figure chart. The main reason for the proposed short entry is the intensive insider-selling activity.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.