Why You Should Buy Herbalife Ltd. (HLF)

Herbalife on the other hand, has overcome some major setbacks in the past, including:

The 1985 Congressional Hearings on weight-reduction programs, where Senator William V. Roth, Jr. (R-DE) grilled the company founder Mark Hughes about the “research and testing” done prior to marketing Herbalife’s products.

The 1986 Permanent Injunction against Herbalife Ltd. (NYSE:HLF) from a CA court that stops the company from making certain product claims and requires it to maintain certain standards within its marketing program to set it apart from a pyramid scheme.

The 1998 cardiac arrest suffered by a 28-year-old woman that the Food and Drug Administration attributed to a Herbalife ephedrine product, Original Green.

The 2000 death of founder Mark Hughes at age 44 from a mixture of Drugs and Alcohol.

Yet the company continues to grow markets, revenues, distributors, and income. I was concerned that their growth might be coming only from opening new markets, however as reported in their most recent 10K filing, all regions are growing revenues including North America.

Given past decisions of the FTC and their reliance on the decision made in the Amway case in 1979, declaring Amway a legit multi-level marketer and not a pyramid scheme, whereas in Amway, salespeople received compensation for products they purchased and sold to other distributors and other consumers, just like at Herbalife Ltd. (NYSE:HLF), I can’t imagine the company being shut down as an illegal pyramid scheme in the U.S.

At the current stock price, the company is trading at a modest 9.5 P/E Ratio, and a .58 PEG Ratio, with a dividend yield of 3.1%. Additionally, on July 30, 2012, the board of directors authorized a new $1 Billion share repurchase program that will expire on June 30, 2017. Given the continued earnings growth, this share repurchase program, and Carl Icahn’s influence and history of bringing value out of companies, Herbalife only needs to get back to $55 for a return of more than 30% which is much less than its high of $73 last year.

The article Why You Should Buy Herbalife originally appeared on Fool.com and is written by Anthony Mitchell.

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