One Multi Level Marketer Is On A Tear: Herbalife Ltd. (HLF)

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Valuation
Given the fundamental differences of the business models, the peer valuation does not mean much for investors, nor does a profitability or balance sheet comparison.  But let’s look at how these companies compare on a straight growth basis:
Avon Estee Lauder Revlon
5-Yr. Historical EPS Growth -39% 14.80% 26%
5-Yr. Historical Cash Flow Growth -42% 12% 81%
5-Yr. Expected EPS Growth 8.80% 13% 5%

Don’t be fooled

The historical growth for Avon has been poor, and its future growth is mediocre at best. Avon’s forward P/E of 23x also appears rather high, making the stock ‘expensive’ after its recent run up. The chart below shows that the 23x multiple is near historical highs.

I would rather invest in beauty products that have a more diverse sales outlet, such as Estee Lauder. Estee is up only 5% year to date compared to the huge run ups by Avon and Revlon, but it does boast the best expected long-term growth rate.

The article One Multi Level Marketer Is On A Tear originally appeared on Fool.com and is written by Marshall Hargrave.

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