Vitamin Shoppe (VSI) has been on a tear this year. That’s good. But the company’s success is tied to same store sales growth — which was 10% last quarter — and when same store sales growth cools to the single digits, this stock will too.
One Year Chart
I’m jealous we weren’t in this stock this year. But VSI’s profit growth has been better than expected in each of the last four quarters, so it was tough to forecast this kind of success. Four quarters ago 2012 profit growth was supposed to come in at 11%. Now its looking like 25%.
Sales rose only 14% last quarter on a 10% increase in same store sales (SSS). Sales wouldn’t have been up much if it weren’t for the SSS figure. Ten percent SSS growth is hard to do for a long period, and I feel if (when) that happens VSI will won’t be able to keep its phat P/E of 24. Really, I can see this stock selling for 15 times earnings when SSS growth goes normal.
Fair Value
For now I think 20 times earnings is reasonable for this stock. I’m not a buyer at these levels. In comparison, look at GNC (GNC), which is selling for only 13 times earnings. GNC has huge upside compared to VSI.
Sharek’s Take
Vitamin Shoppe is on a tear because same store sales are. I feel this stock is fairly priced and doesn’t possess upside. On the other hand, GNC looks even better now that we see the VSI numbers. I’m betting GNC is a big winner in 2013.
View the Earnings Table here.View the Ten Year Chart here.
