Herbalife Ltd. (NYSE:HLF), the multi-level marketing company selling nutritional and weight management products is expected to experience rapid growth in China by Timothy Ramey, analyst at D.A. Davidson & Co.

Herbalife

Herbalife net sales growth

Herbalife Ltd. (NYSE:HLF) has a net sales growth of 77% year-over-year in China, which accounts for 11% of its total revenue in the third quarter. China is currently the third-largest market for the company. Ramey projected that China will become the number one market for the company by 2015.

Ramey noted that the growth of multilevel marketing companies in China is not the same as before. According to him, Herbalife Ltd. (NYSE:HLF) is “no longer cautious” about the country and it “will make China a greater focal point of its business.”

The analyst also emphasized that the attack on the business model of the company by hedge fund manager Bill Ackman of Pershing Square Capital Management did affect its ability to recruit new distributors. Herbalife Ltd. (NYSE:HLF) reported a 13.3% growth in distributors in the third quarter.

Herbalife earnings

The management of the company improved its training process by ensuring that all of its new distributors must participate in a training session and annual re-certification. They must acknowledge an average compensation disclosure and to undergo further training to open a nutrition club. Ramey said, “These are all better business practices that better protect the business model from specious attacks.”

During the period, Herbalife Ltd. (NYSE:HLF) generated $1.41 earnings per share, up by 36.1% from a year earlier. It is also higher than the $1.18 earnings per share consensus estimate of Wall Street analysts. Its net sales increased by 19.3% to $1.21 billion.

Herbalife is a high growth stock

In addition, Ramey said the short interest on Herbalife’s outstanding shares declined from 29.5% to 18.3%. According to the analyst, the company has a healthy balance sheet with plenty of cash even after repurchasing $110 million worth of stock in the third quarter.

Ramey believes that Herbalife Ltd. (NYSE:HLF) remains extremely attractive despite its excellent price performance. The shares of the company are trading at 12.0x 2013 EPS and 8.0x EV/EBITDA. He emphasized that Herbalife Ltd. (NYSE:HLF) is a high growth stock with tremendous upside. He maintained his Buy rating with a price target of $92 per share.