Shares of Nu Skin Enterprises, Inc. (NYSE:NUS)are poised to trade higher over the next few quarters as the company rolls out a new product offering that should drive sales significantly higher.
With a well established global sales network, and a strong reputation for quality products, Nu Skin’s highly-anticipated release of its new weight loss management system should act as a catalyst for a dramatic increase in the stock price.
Investors should do their homework now, and add Nu Skin to their portfolio before the data starts coming in from this new product launch. By that time, the stock price will likely already be much higher, and investors who delay will miss out on potential profits.
Mastering a specific niche
Nu Skin Enterprises, Inc. (NYSE:NUS) is a health and beauty company that focuses on anti-aging products. The company generates roughly half of its revenues from from its line of personal care products, and half from its nutrition segment.
Nu Skin sells its products through a direct marketing strategy. The company recruits independent sales representatives to peddle its products – thus allowing them to operate with lower overhead costs , and penetrate markets that might be otherwise unavailable.
While the company focuses on a relatively narrow product line, Nu Skin Enterprises, Inc. (NYSE:NUS)’s geographic footprint is anything but narrow. Over the past 28 years, Nu Skin has been expanding its sales force to over 50 countries. Recently, the company has been experiencing strong growth in emerging markets, with Chinese operations reporting a 90% year-over-year increase last quarter.
The business model is a great example of a company that has developed a strong reputation in one area (anti-aging products), and aggressively expanded within its particular niche.
Nu Skin Enterprises, Inc. (NYSE:NUS) has grown to a very respectable market capitalization of $3.55 billion, with 2012 revenue of $2.17 billion. But despite its size, Nu Skin still has room to continue to grow. Analysts expect the company to earn $4.29 per share this year, which represents a 22% increase over 2012 earnings.
More importantly, these analysts have been increasing their expectations over recent weeks, as more information on the new product surfaces.
Over the past 28 years, the company has perfected the art of launching new products. When new products are introduced to the company’s customer base, there is a drawn out process that takes place. This process includes extensive testing, education of the customer base in advance of the product being available, and of course a strong effort put into educating the company’s sales force.
Given the company’s skill at introducing new products, the loyalty of Nu Skin Enterprises, Inc. (NYSE:NUS)’s customer base, and the strong consumer demand for a healthy weight loss system, Nu Skin’s upcoming launch could turn out to be a major catalyst for investors.
Strong demand for health and beauty
Demand for health and beauty products continues to grow as the global population ages.
Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) announced earnings this week, beating expectations and trading sharply higher. The company currently manages 576 stores in the US and will add another 125 stores this year due to increasing demand.
Same store sales for the company grew 6.7% last quarter with online sales increasing by 70%. Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) doesn’t represent quite the same compelling opportunity that I see in Nu Skin right now – primarily because analysts are keeping their estimates steady (expectations are not expanding), and the stock is trading at more than 23 times forward earnings.
But the company’s strong performance, and premium stock valuation is a good example of tremendous consumer demand for health and beauty products.
Direct marketing done right
As noted Nu Skin Enterprises, Inc. (NYSE:NUS) sells its products through a direct marketing strategy. So how is it doing compared with other companies in that field?
Earlier this week, I mentioned the direct marketing platform operated by Herbalife Ltd. (NYSE:HLF). Herbalife has been accused of operating a multi-level marketing scheme where it is unclear whether the company is profiting from selling its actual products, or simply by collecting dues from new sales associates.