While the S&P 500 had fallen 5% this year, personal care products maker Nu Skin Enterprises, Inc. (NYSE:NUS) is up 51%. Nu Skin is on fire this month, having risen 29% in September as the market struggles for direction. Expect Nu Skin to keep getting healthy. (For more check out Steady Growth Stocks Win The Race.)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Nu Skin's Healthy Business
Nu Skin operates in two segments: beauty care and nutritional supplements. Nu Skin's beauty care division - with products including soaps, moisturizers and cosmetics - competes indirectly with the likes of Avon Products, Inc. (NYSE:AVP) and The Estee Lauder Companies Inc. (NYSE:EL). The Pharmanex nutritional brand markets products such as weight management supplements and energy drinks. Pharmanex competes directly with Weight Watchers International, Inc. (NYSE:WTW), Herbalife Ltd. (NYSE:HLF) and a wide array of nutritional supplement providers and biopharma companies.

Earnings have been extremely healthy in both segments. During the second quarter, net income soared around 30% compared to the same period last year. Revenues rose 9% quarter over quarter to $424 million, aided by an 8% foreign currency translation. Nu Skin's significant exposure to healthier Asian economies (19% of revenues are earned in China, 43% in North Asia, and 14% in South Asia and the Pacific) is paying big dividends while the United States and Europe lag behind. Despite being based out of Provo, Utah, just 14% of revenues come from the United States.

Can You Trust This Multi-Level Marketer?
Global growth should continue to drive sales higher in the near term, but there are legitimacy and health concerns in the anti-aging cream and dietary supplements business. Nu Skin was fined by the FTC several times in the mid-1990s for making unsubstantiated promotional claims. Additionally, the multi-level marketing (MLM) model has flaws. While direct marketing keeps costs low (not having to sell through products via stores and retailers), consumers can only purchase Nu Skin products through individual distributors.

Investors need not be overly concerned. Management has decades of experience employing the direct marketing model. Blake Roney, who founded the business in 1984, is Chairman of the Board, and other key management members still populate the ranks of Nu Skin's executive team. The company has been able to steadily grow the number of "executive distributors" - individuals with large distribution networks - that drive revenues. Management knows the business, understands how to recruit distributors without the traditional high MLM churn rate and has a track record of increasing shareholder value.

The Bottom Line
Nu Skin is growing revenues and improving at the margin. Operating margins climbed 0.4% to a best ever level of 15.6% last quarter, and gross margins improved to 83.2%. With a low, manageable debt load and decent 1.4% dividend, Nu Life is poised to keep outperforming. Strong management, an expanding emerging market footprint and well received new products like the ageLOC skin care line suggest Nu Skin can continue to outperform.

Nu Skin has been setting fresh all-time highs over the past three weeks. A retest of the $46.93 level is likely as extreme volatility has failed to curb investor's appetite for the stock. Valuation is a concern at these levels, yet Nu Skin may continue to shed market drag and rise within the current upward trending channel. (To learn more, check out Great Company Or Growing Industry?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Fortinet: A Great Play on Cybersecurity

    Discover how a healthy product mix, large-business deal growth and the boom of the cybersecurity industry are all driving Fortinet profits.
  2. Stock Analysis

    2 Catalysts Driving Intrexon to All-Time Highs

    Examine some of the main reasons for Intrexon stock tripling in price between 2014 and 2015, and consider the company's future prospects.
  3. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  4. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  5. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  6. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  7. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  8. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  9. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!