January 7, 2014
Industry Trends Favor ForeverGreen and Direct Marketing Firms
Following a solid year across the board in 2013, many direct marketing firms such as Nu Skin (NYSE – NUS), Herbalife (NYSE – HLF), Usana Health Sciences (NASDAQ – USNA), and ForeverGreen Worldwide (OTCQB – FVRG - $0.91 – Spec Buy) appear poised to have a banner 2014. In fact, the convergence of two key events is creating a perfect storm for these direct sellers of natural products.
According to a recent article in Nutraceuticals World, the nation’s focus on the Affordable Care Act and its higher cost of insuring patients is increasing the size of the market for nutraceuticals as more and more Americans seek to enhance their health and wellness and prevent chronic health issues through the purchase of healthy products. One of the megatrends in this segment is the huge growth in the functional or nutritional beverage market, which plays to the strength of ForeverGreen, Herbalife and Usana.
Another big trend is the growth abroad in the direct sales industry. According to the Direct Selling Association, the largest market is the U.S., with $30 billion in goods and services sold by 16 million independent sales people. However, markets in Asia such as Japan, with roughly $25 billion in annual are playing an ever-increasing role. Therefore, firms that have the largest global footprint may prove to generate the greatest sales growth next year.
Not surprisingly, direct marketing leader Nu Skin is currently afforded the largest market cap and highest valuation as its Wall Street=projected top-line and bottom-line growth rates are forecast to jump by 30% and 28%, respectively, in 2014, led by sales increases abroad. The stock currently trades just shy of its 52-week high and at an 18x P/E multiple on Street-projected FY14E earnings per share. Herbalife also trades near its year-high but has a lower valuation given its lower expected earnings growth rate.
Interestingly, ForeverGreen boasts what may be the largest global sales footprint, and popular functional beverage and specialty products to treat chronic health issues such as back and other inflammation, which dovetails with the most important industry trends. Yet, the company, which may be the fastest growing publicly traded firm in the space, trades at the lowest valuation.
Much like Nu Skin and Herbalife, which offer personal care and nutritional products, ForeverGreen’s sales are driven by the popularity and efficacy of its popular FrequenSea™ whole-food beverage with industry exclusive Marine Phytoplankton and the new, FDA-listed Class 1 Medical Device PowerStrips offering to treat pain. These and other exclusive products are expected to enable the company to double its sales in 2014 and drive a big rise in earnings as well.
Given the favorable trends afforded the direct marketing space and the favorable valuations associated with stocks such as ForeverGreen, Nu Skin and Herbalife, consumers and investors alike could be rewarded.
For more information, refer to our previous sponsored FVRG Reports, Updates and Hot Topics by visiting www.GoldmanResearch.com
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Senior Analyst: Robert Goldman
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