This Stock is Thriving in the Growing Brain Health Market

A third major study came out last week from Mass General Brigham finding that multivitamins may not only help with memory in aging adults, but actually slow cognitive degeneration. Good news for an aging U.S. population, which by 2060 will have one quarter of adults in the age bracket deemed high risk for Alzheimer’s. 

This is also good news for companies engaged in selling products which suddenly have a greater benefit than they did before last week’s study. Nature's Sunshine Products (NATR), an A rated POWR Ratings stock, sits squarely in the sweet spot to benefit from this new study. And, it's not like the natural supplement health and wellness company isn’t already hitting on all cylinders. 

One of the biggest challenges in the supplement industry is proving to consumers the product being sold contains what it says it does. In recent years both Amazon (AMZN) and GNC have been sued for selling counterfeit supplements that either don’t contain their stated ingredients, or may contain harmful substances. 

Nature’s Sunshine tackled this problem head on from the beginning, manufacturing in house all of the products they sell. From their vitamin supplements, to their Power Meals in a bag, the company not only makes all of their own products, but meets a slew of government standards globally. In the U.S. they are strictly regulated by the FDA, and they meet a number of high manufacturing standards such as ISO 9001. 

With a firm foundation of reliable products the company has recently made its number one focus building out its digital business. The company has a goal of making digital sales over 50% of its North American business. Currently over 60% of digital sales are subscription sales, which ensures a recurring revenue stream. 

In addition to its digital focus, Nature’s Sunshine has put a premium on training and educating its distributors, which currently make up about 60% of its sales. This strategy is paying off in spades, with a perfect example being its Taiwan business. Over the past four years the business has grown from almost nothing to $57 million in revenue, a 139% compound annual growth rate from 2019 to 2023. These distributors are the front line sales reps for the product, and having them on board with the latest information and selling techniques is key.

In its latest earnings report the company delivered double digit revenue growth in both the North American and Asia/Pacific markets. NATR saw earnings increase 6% in the quarter YoY to $111 million. 

Commenting on the quarter, CEO Terrence Moorehead stated, “APAC saw strong order growth with a 12% increase in local currency sales, while the North America business continued to respond well to our digital investments and improved field activation [distributor training], delivering 11% growth for the quarter, the strongest growth in many years.”

On top of the digital focus and distributor training, the company has been financially focused on improving margins. This also began to hit the bottom line this quarter as NATR saw a 50% increase in EBITDA in the quarter. Moorehead noted, “Our continued above-market growth and aggressive cost initiatives combined to deliver a 50%+ increase in EBITDA in Q3 to $10.3 million.”  

The stock, which more than doubled last year, still trades at only .38 times sales and just a little over 1 times book value. 

As I said above, NATR is an A rated stock in our POWR Ratings. The company has an astounding 99.92% overall rating, one of the highest rated stocks we track. It knocks the cover off the ball in Value, at 95.69%, Quality, at 99.32%, and Sentiment, at 99.26%.

While the company was already performing at a high level, the release of the supplement study, with its findings regarding the positive effects of supplements on memory for an aging population, should provide a boost to Nature’s Sunshine for several quarters. Even though it is trading near historical highs, its growth trajectory appears to be trending higher, and it doesn’t look to be overvalued at these levels.

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NATR shares were trading at $17.61 per share on Tuesday afternoon, up $0.21 (+1.21%). Year-to-date, NATR has gained 1.85%, versus a 1.66% rise in the benchmark S&P 500 index during the same period.

After earning a law degree cum laude with a focus on securities law, Steven worked as a Nasdaq market maker for a large broker dealer, and then as a trader for an arbitrage focused proprietary hedge fund. He subsequently worked as a consultant for a Fortune 500 consulting firm serving both government and commercial clients, including the NYSE, Prudential, FDIC, and NASA.

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