Major Upside as Nu Skin Enterprises, Inc. (NUS) Launches New Product

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While Herbalife Ltd. (NYSE:HLF) continues to grow earnings aggressively, and is trading at an attractive multiple, the company’s regulatory risk is a point of concern for some investors.
But Nu Skin operates its direct marketing platform much differently. Notably, 85% of customers who purchase products from Nu Skin never actually join the sales network. This is an important point, because it proves that the company is actually conducting legitimate business with it’s widespread sales approach.
This sales approach is what has allowed the company to effectively branch out into new countries, and also what allows them to quickly get new products to their wide base of customers.
Growth at a (very) reasonable price
As mentioned, analysts currently expect the Nu Skin Enterprises, Inc. (NYSE:NUS) to earn $4.29 per share this year. In 2014, analysts expect the company to continue to grow earnings to $4.89 per share. And these estimates are being revised higher as analysts incorporate revenue from the new product into their models.
Nu Skin is currently trading at just over 14 times expected earnings for 2012.
Over the next year, I expect investors to be willing to pay at least 20 times earnings for this growth company. This is reasonable given the strong growth in earnings and revenue, along with increasing investor sentiment as Nu Skin effectively brings this new product to market.
At 20 times earnings, shares of Nu Skin would hit $97.80, well over a 50% increase from today’s prices.
This increase could happen gradually, as quarterly sales figures trickle in, or it could happen suddenly (possibly after the company issues a press release offering sales figures for the new product).
The key here is to own the stock well in advance of the actual product launch (scheduled for the second half of 2013), in order to capture maximum profits!

Zachary Scheidt has no position in any stocks mentioned. The Motley Fool recommends Ulta Salon, Cosmetics & Fragrance. The Motley Fool owns shares of Ulta Salon, Cosmetics & Fragrance and has the following options: Long Jan 2014 $50 Calls on Herbalife Ltd. (NYSE:HLF). Zachary is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Capture Major Upside as Nu Skin Launches New Product originally appeared on Fool.com and is written by Zachary Scheidt.

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