Nautilus Still Fit Despite Great Run

In Monday’s Goldman Guide we discussed one of our older picks, Craft Brew Alliance, Inc. (NASDAQ – BREW), and how we still thought the party was on for the stock. Today we will look again to one of our older picks that has had a huge rise recently. This Company is the 180-degree opposite of BREW as far as products and services. It is definitely out to ‘get’ the beer belly.

Nautilus, Inc. (NYSE – NLS - $23.29) was a stock we featured in the 30-30 in May of 2013 at $7.58. The stock has had some peaks and valleys but is up 212%! Below is the one-year chart which illustrates the stock is trading well above the 200-day EMA technical indicator.

NLS 1-Year, 200 Day EMA

(Source: www.otcmarkets.com)

Nautilus, Inc., a consumer fitness products company, designs, develops, sources, and markets cardio and strength fitness products, and related accessories for consumer use in the United States, Canada, and internationally. The Company operates in two segments, Direct and Retail. It offers specialized cardio, treadmills, ellipticals, and bike products under the Nautilus brand; fitness equipment comprising cardio and strength products, including TreadClimber and Max Trainer specialized cardio machines, PowerRod and Revolution home gyms, and SelectTech dumbbells under the Bowflex brand; cardio products, including elliptical machine under Octane Fitness brand; and recumbent elliptical under xRide and LateralX brand names. The Company also provides exercise bikes, including the Airdyne, treadmills, and ellipticals under Schwinn brand; and various kettlebell weights and weight benches under Universal brand. In addition, it engages in licensing its brands and intellectual properties.

We think NLS is worth holding on to for several reasons. On the technical side, the short float is a low 2.5%. Additionally, the operating margin of 13.6% is well above the sub-sector average of about 8.5%. It illustrates the Company is operating extremely efficiently. Also, the trailing P/E of 25 versus the forward P/E of 17 on consensus analysts’ forecast of 20% average growth over the next two years is another positive sign. Finally, the Company has performed exceptionally well related to EPS by beating or exceeding the forecast four consecutive quarters.

NLS is a solid stock and solid Company. Product innovation remains at the forefront making it a definite buy and hold candidate. However, we believe the stock will run to $25 by the end of the year.

Have a great day!

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