Nature's Sunshine has had an impressive run over the past six months as its shares have beaten the S&P 500 by 8.4%. The stock now trades at $17.22, marking a 20% gain. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Nature's Sunshine, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Nature's Sunshine Not Exciting?
We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are three reasons why NATR doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Nature's Sunshine struggled to consistently increase demand as its $460.8 million of sales for the trailing 12 months was close to its revenue three years ago. This was below our standards and signals it’s a lower quality business.
2. Fewer Distribution Channels Limit its Ceiling
With $460.8 million in revenue over the past 12 months, Nature's Sunshine is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Nature's Sunshine’s revenue to rise by 1.3%, close to This projection is underwhelming and indicates its newer products will not catalyze better top-line performance yet.
Final Judgment
Nature's Sunshine isn’t a terrible business, but it doesn’t pass our bar. With its shares beating the market recently, the stock trades at 21.6× forward P/E (or $17.22 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at the most dominant software business in the world.
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