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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. In addition, NUS is also focused on manufacturing and controlled-environment agriculture. The company operates in seven geographies, including China, South Korea, Southeast Asia, the Americas/Pacific, Japan, Hongkong, and the EMEA region. As of June 07, 2021, the company’s market capitalization stood at USD 3.08 billion.
Inorganic Expansion Endeavors: On April 19, 2021, the company acquired a 100% stake in MyFavouriteThings, Inc. a digital technology development company, in exchange for a total cash consideration of USD 17.0 million. Earlier on January 26, 2021, NUS had announced the acquisition of Ingredient Innovations International Company (3i Solutions), an innovative ingredient manufacturing company, for a total purchase consideration of USD 15.7 million.
Q1FY21 Results: The company reported a 30.69% rise in net revenue to USD 677.03 million in Q1FY21 (ending March 31, 2021) as compared to USD 518.03 million in Q1FY20, primarily due to a USD 74.89 million increase in revenue from the Americas/Pacific region. 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.
Key Risks: Being a multi-level marketing company, NUS faces scrutiny and continual challenges from government regulators such as the US Federal Trade Commission. If new laws and regulations are introduced that curtail direct selling, then the firm could see its revenue and profitability decline. In addition, the company is becoming increasingly dependent on social commerce, and social media platforms may at any time decide to prohibit, block or decrease the prominence of NUS’ sales content for any reason, which could impact its revenue and financial position.
Outlook:
Q2FY21 Guidance (Source: Q1FY21 Earnings Presentation, May 2021)
Valuation Methodology: Price/Earnings Multiple Based Relative Valuation
(Data Source: REFINITIV, Analysis by Kalkine Group)
NUS Daily Technical Chart (Source: REFINITIV)
Stock Recommendation: NUS increased by 18.48% and 16.61% in the past 3 months and 6 months, respectively, and is currently at the higher end of the 52-week range of USD 35.62 to USD 63.85. The stock is currently above its 200 DMA levels. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 55.04. Considering the rise in the stock price in the last nine months, decent financial performance, and valuations not justifying the current market price, we recommend an “Expensive” rating on the stock at the closing price of USD 61.28, up by 0.49% as of June 07, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
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Past performance is not a reliable indicator of future performance.
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