Herbalife continues to get flak from activist investor Bill Ackman for allegedly making false medical claims. However, analysts from most firms remain bullish on the controversial company, even after the FDA delivered a slap on the wrist for comments made by an executive in a video regarding allegedly misleading comments.

Herbalife Ltd. HLF

Herbalife’s earnings quality remains strong

Analysts at Jefferson Research rate Herbalife as a Buy, the rating is a result of continued strength in four of the five areas they evaluate to come up with their rating. The analysts say the multi-level marketing company’s earnings quality has remained at the Strongest level throughout the year, while its cash flow quality has been rated Strong since the first quarter after being downgraded from Strongest.

Herbalife’s operating efficiency has remained Strong throughout the year, according to Jefferson, although the company’s balance sheet has weakened this year. After receiving a Strongest rating in the fourth quarter of last year and the first quarter of this year, they downgraded the company’s balance sheet from Strongest to Weakest in the second quarter. However, they upgraded it to Weak for the third quarter.

The analysts rate Herbalife’s valuation has having the Least Risk, which is why their overall rating for the company is Buy.

Herbalife’s solid earnings quality

Herbalife received several analyst downgrades following its most recent earnings report, although many analysts remain bullish on the multi-level marketing company. Despite the disappointing earnings report, Jefferson analysts still like the quality of Herbalife’s earnings.

The company posted net income of $11 million in the last quarter, which was the same as the adjusted number. Jefferson analysts call the quality of Herbalife’s net income “extremely high.” Operating cash flow fell from $156 million in the previous quarter to $101 million. However, the analysts say the quality improved because the ratio of operating cash flow to earnings rose. (All graphs in this report are courtesy Jefferson Research.)

Herbalife’s cash flow quality deteriorates

Although Jefferson left their rating for Herbalife’s cash flow quality at Strong, they say it did deteriorate a bit during the third quarter. They note that the difference between the reported $67 million in cash flow and the adjusted -$106 million was wider than it was in the second quarter.

Herbalife sees stronger gross margins

The analysts kept Herbalife’s operating efficiency at Strong, although they noted an improvement in the company’s gross margin. However, they say returns on incremental invested capital, net margin, ROIC, EBIT margin and selling, general, and administrative expenses weakened.

Herbalife’s balance sheet strengthens

To determine the quality of Herbalife’s balance sheet, Jefferson takes into account quick ratio, current ratio, cash position, accounts receivable days outstanding, and the number of days inventory is held before being sold. They say the balance sheet quality improved in the third quarter from Weakest to Weak due to improvements in the debt / equity. However, the company’s cash position fell from $773 million to $678 million.

Shares of Herbalife fell less than 1% during regular trading this morning.