Herbalife Ltd. (NYSE:HLF)’s stock received a “strong buy” recommendation from ValuEngine, according to a research report posted yesterday. On the other side is William “Bill” Ackman who believes that the company is a pyramid scheme. The stock value of Herbalife Ltd. (NYSE:HLF) plummeted sharply after Ackman’s accusations against the company.
According to ValuEngine, Herbalife Ltd. (NYSE:HLF) stock is expected to outperform the average market performance next year, based on its research. The research firm believes that Herbalife stock is undervalued by 59.79 percent and should be trading around $68.17 per share.
ValuEngine suggests the best time to buy Herbalife stock is when the stock price is below $30.67 per share, and the best time to sell is when the stock is above $108.38 per share.
In the research note, ValuEngine wrote, “We base this on actual earnings per share (EPS) for the previous four quarters of $3.98, forecasted EPS for the next four quarters of $4.52, and correlations to the 30-year Treasury bond yield of 2.93%.”
The research firm also explained that it used the average historical market ratio of the company’s stock over the past ten years and the current average market ratio of five comparable stocks in the same sector from companies of similar size to establish a valuation standard.
Based on ValuEngine rankings using its ten predictive variables for a stock, HLF ranked 12th on its performance over the past 12 months and ranked 5th on its performance over the past five years.
Its volatility at 59.1p percent, EPS growth at 13.56 percent, and market cap of $3.07 billion ranked 37th, 46th, and 84th, respectively. According to ValueEngine, Herbalife’s Sharpe ratio 0.1 is slightly higher than the industry. The Sharpe ratio measures the risk return tradeoff offered by the stock.
Herbalife’s P/S ratio at 0.79 percent ranked 69th compared with the industry’s 0.45 percent. Its market/book of 8.25 percent ranked 11th, and its PE ratio at 6.89 percent, ranked 95th. The PE ratio of the company is significantly higher than industry’s PE of 29.6 percent.
The research firm expects Herbalife Ltd. (NYSE:HLF) to deliver a month return of 4.24 percent, three months return of 6.20 percent, six months return of 11.09 percent; and a one-year return of 14.61 percent. Over the next two or three years, the company is expected to deliver more than 17 percent returns.
There is one big cavet. ValuEgine's methodology is entirely quantitative and does not look at issues such as whether a company is a pyramid scheme.