Nu Skin Enterprises, Inc.

NUS Details

Nu Skin Enterprises, Inc. (NYSE: NUS) is a multi-level marketing (MLM) company that develops and sells health and beauty products. The company sells its products under the “Nu Skin”, “Pharmanex” and “ageLOC” brand names. The company operates in seven geographies such as Mainland China, South Korea, Southeast Asia, Americas/Pacific, Japan, Hongkong and EMEA region. The company also operates in manufacturing and controlled-environment agriculture. As of May 5^th, 2021, the company’s market capitalization stood at USD 2.67 billion.

Change in Management: As of April 21^st, 2021, the company announced Connie Tang, to enter the company as Executive Vice President and Chief Global Growth & Customer Experience Officer. During her tenure, Tang will be monitoring the global market and also be responsible for creating opportunities for brand associates and sales leaders.

Q1FY21 Results: The company reported a 30.69% rise in net revenue to USD 677.02 million in Q1FY21 (ending March 31, 2021) as compared to USD 518.02 million in Q1FY20 (ending March 31, 2020). The company reported an increase in net income to USD 47.43 million in Q1FY21 as compared to that of USD 19.73 million in Q1FY20. The net cash flow from operations stood at negative USD 18.85 million in Q1FY21 as compared to that of USD 69.02 million in Q1FY20.

Key Risks: Being a multi-level marketing company, NUS faces close scrutiny and continual challenges from government regulators such as the US Federal Trade Commission. If new laws and regulations are introduced that curtails direct selling, then the firm could see their revenue and profitability decline.

Outlook:

Q2FY21 Guidance (Source: Company’s earning presentation, May 05^th 2021)

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

NUS Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: NUS has already surge by 12.75% in the past nine month and is currently leaning towards the higher end of the 52-week range of USD 26.83 to USD 63.85. We have valued the stock using the Price/Earnings based relative valuation methodology and arrived at a target price of USD 48.31. Considering the rise in the stock price in the past nine months, changes in management, and with valuations not justifying the current market price, we recommend an "Expensive" rating on the stock at the closing price of USD 53.40, up by 2.50% as of 05^th May 2021.