Ever since word surfaced in January of Chinese authorities investigating certain business practices of Nu Skin Enterprises (NUS), the stock of the network marketing company has been under pressure, hitting a new 52-week low last week.
Nu Skin is a direct selling company that develops and distributes personal care and nutritional products. It is probably not a coincidence that the decline in NUS is occurring at the same time as the ongoing battle in Herbalife (HLF) shares over whether or not that company is an illegal “pyramid scheme” that exploits its distributors.
But where the rubber meets the road for any public company is in the earnings outlook because analysts who make such projections are taking into account regulatory and legal issues and obstacles.
Here’s a look at the Zacks proprietary Price & Consensus chart which plots annual earnings estimate revisions against stock price so that one can visualize how price almost always follows EPS momentum…
Recent downward estimate revisions have come from analysts concerned about sales growth and product demand in China following the resumption in May of recruiting activities there.
Bottom line: Nu Skin may be a solid investment with attractive valuation metrics like a forward P/E near 10X and a Price-to-Sales ratio near 1.0. But until the earnings estimates begin to turnaround, it’s probably best to put your money elsewhere. Keep an eye on the Zacks Rank to let you know when that story changes.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.
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