Shares of Nu Skin (NUS) are very tempting here. The stock is undervalued by 20% but there’s uncertainty to the shares due to Nu Skin’s sales practices in China. For more Nu Skin’s China issues click here.
One Year Chart
NUS had profit growth of 45% last quarter on a 40% pop in sales. The company launced a new product like dubbed age LOC Body Spa this year and the new stock hit shelves Q1 through Q3 of 2012. So that’s why we see Estimates show only 12% and 5% growth coming the next two quarters — most of the growth has already occured.
Fair Value
I feel NUS would be worth 17 times earnings if we didn’t have the uncertainty in China to deal with. In defense of NUS, the company spent a lot of time talking about its China operations during last quarter’s conference call. It didn’t shy away.
Still, the stock is cheap at 13 times earnings, especially considering NUS also has a 1.9% yield. This $42 stock could be $60 by next year.
Sharek’s Take
I like this stock and want to buy it. Yes there’s risk with China but I’m not afraid of risk. The real reason I’m not buying back into NUS today is that revenue growth is expected to slow from 40% last quarter to 11% this quarter. That’s deceleration, and deceleration is something that scares me. Tough comparisons are the name-of-the-game now, and as you can see in the Earnings Table, NUS is going to have tough comparisons through at least the third quarter of 2013.
I need either closure to the China saga, quarterly estimate increases, or an unwarranted drop in NUS stock to buy in.
