USANA Health Sciences: Strong Moat, Highly Profitable And Growing Sales

Summary

  • Founded by a world-class scientist while marketing its products via Olympians, Dr. Oz., and strong sales associates, USANA created the entrenched moats of brand recognition and product awareness.
  • With increasing expansion into the vast Asian markets, the firm is well positioned for continuing sales growth.
  • As the world population is aging, there is an increasing demand for personal wellness products to service degenerative diseases.
  • Despite operating a highly profitable business, the company is on sales as indicated by the mouthwatering P/E of 17.

Background

According to research at the National Institute of Health, global life expectancy is projected to increase by almost eight years (from 68.6 years in 2015 to 76.2 years in 2050). Moreover, the number of people aged 80 and older (in some Asian and Latin America countries) are expected to increase as much as four fold by the same year. With the aging world population comes the rising demand for personal wellness products (aka herbal/dietary supplements) to service the degenerative diseases (like osteoarthritis or the usual "wear and tear") that come with aging. That being said, USANA Health Sciences (NYSE:USNA), a firm based in Salt Lake City, Utah, is poised to capture this niche of growing demand.

Source: Google Finance

And with the recent completion of its China manufacturing facility, USANA is gearing up for continuing its explosive growth in the Asia-Pacific regions. Of note, the Asian demographics tend to consume more herbal supplements than elsewhere in the world due to their cultural receptiveness toward complementary and alternative medicine. As a result, the oriental environment created the highly favorable market (and reinforced the entrenched moat) for USANA's business operations.

Low Costs/Less Regulatory Oversees

In contrast to a developmental-stage biopharma (that usually incurs approximately $1B to innovate a therapeutic from bench research to commercialization in a decade-long process), firms selling supplements like USANA have key advantages. Notably, there are no strict regulatory hurdles that can hamper corporate growth. Hence, the company is not required to run its products through the time-consuming and cost-burdening process of clinical studies (that are requisites for a biotech firm).

Aside from the minor manufacturing and other quality measures, USANA has very few regulatory constraints. Accordingly, the firm can rapidly launch its products with just the following compliance label:

"These statements have not been evaluated by the

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