The Best of Breed Nutritional Company: GNC Holdings Inc (GNC), Rite Aid Corporation (RAD), Vitamin Shoppe Inc (VSI)

Competitor in the Market

Vitamin Shoppe Inc (NYSE:VSI) is a rival retailer of vitamins, nutrition and health related products. They dropped over 20% after reporting quarterly results on Feb. 26. The company missed big on revenues, reporting $218.9 million versus analyst estimates of $223.6 million. Earnings per share were in line, but this did not deter Wall Street from turning negative on the stock.

On top of the bad results and the selloff, Vitamin Shoppe has been hit with several analyst downgrades including moves by Credit Suisse and Bank of America. While GNC Holdings Inc (NYSE:GNC) continues to impress, Vitamin Shoppe Inc (NYSE:VSI) will have to take the back seat in this growth industry.

Here is a great photo I took on a recent trip to New York City, it basically sums of the competition between GNC and Vitamin Shoppe:

Current Share Price

Before the market open on March 11, GNC is trading at $40.43. With earnings per share of $2.33, this means they are trading at a multiple of 17.35. This is low compared to the industry average of 22.

GNC Holdings Inc (NYSE:GNC) pays out an annual dividend of $0.60, representing a yield of 1.48%. The dividend was raised from $0.44, a 36% increase, earlier this year. The stock has been performing very well, gaining over 22% year-to-date.

2013: Continued Growth

In 2013, GNC plans to open 150 new domestic locations, 30 new domestic franchise locations, 175 to 200 new international franchise locations, and 30 new Rite Aid Corporation (NYSE:RAD) store-within-a-store locations. They project earnings per share to be between $2.75 and $2.80, an increase of 18-20% from 2012. If GNC were to trade at the same multiple as they currently are, this would propel the stock to over $48 by the end of 2013.

The Foolish Bottom Line

The health industry is growing rapidly because people want to live longer, healthier lives. GNC’s products are essential to achieving a balanced lifestyle as well as seeing results in the gym. I am a believer in this company as I have been a loyal customer since 2005. On any pullback or weakness in the market, I am looking to begin a position. GNC is an incredible long term investment opportunity.

The article The Best of Breed Nutritional Company originally appeared on Fool.com and is written by Joseph Solitro.

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