What a brutal six months it’s been for USANA. The stock has dropped 30.2% and now trades at $14.02, rattling many shareholders. This may have investors wondering how to approach the situation.
Is now the time to buy USANA, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is USANA Not Exciting?
Even though the stock has become cheaper, we’re sitting this one out for now. Here are three reasons we avoid USNA, plus one stock we’d rather own.
1. Revenue Spiraling Downwards
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. USANA’s demand was weak over the last three years as its sales fell at a 1.2% annual rate. This was below our standards and signals it’s a lower quality business.
2. Fewer Distribution Channels Limit Its Ceiling
With $913.4 million in revenue over the past 12 months, USANA 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. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for USANA, its EPS declined by 32.9% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
USANA isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 13.8× forward P/E (or $14.02 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re pretty confident there are superior stocks to buy right now. Let us point you toward the most dominant software business in the world.
Stocks We Like More Than USANA
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