Herbalife (HLF) On Buyback And CEO Change As Fair Value Sits Higher

Herbalife (HLF) has given investors two big headlines in quick succession. A new US$250 million share repurchase over three years and an upcoming CEO transition are reshaping how the market sizes up the stock.

Recent trading tells a mixed story. Herbalife’s share price is down over the past week and month, while the year to date share price return has also declined. However, the 1 year total shareholder return of about 26% shows longer term holders have still seen gains as buyback plans and the CEO change reset expectations around both growth potential and perceived risk.

Spot opportunities that rhyme with Herbalife’s buyback and leadership reset by scanning our hand picked 15 high quality undiscovered gems across the broader market.

So is Herbalife’s muted share price response telling you something about the fundamentals behind that US$250 million buyback and CEO handover, or has sentiment simply not caught up yet with what the business is doing on the ground?

Most Popular Narrative: 29.3% Undervalued

Herbalife’s most followed valuation storyline puts fair value at $17, well above the last close of $12.02, which raises an obvious question about what is baked into those expectations.

The analysts have a consensus price target of $17.0 for Herbalife based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $25.0, and the most bearish reporting a price target of just $9.0.

Read the complete narrative. Read the complete narrative.

Want to see why a slow top line outlook is paired with very fast profit growth and a much lower future P/E multiple than peers? The key assumptions behind that $17 fair value combine margin repair, earnings compounding and a discount rate that quietly does a lot of work. The full narrative lays out how those moving parts fit together for Herbalife.

Result: Fair Value of $17 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

Still, Herbalife’s effort to reposition around personalized wellness and new technology platforms could weaken the case for a low future P/E if its execution gains traction.

Find out about the key risks to this Herbalife narrative.

Next Steps

Mixed signals on Herbalife’s story so far. If you want to move quickly and form your own take, start by weighing the 3 key rewards and 4 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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