Nutrition and personal care products developer Nature’s Sunshine Products, Inc. (NATR - Get Rating) operates internationally, with supply chains across the Americas, Asia and Europe. The company largely benefitted from the high demand for nutritional products over the past year, capitalizing on this growth opportunity by diversifying its operations.

NATR launched a new branding and business model in the third quarter of 2020, which amplified its returns in the next quarter. Sustained demand, particularly from the United States and China, and the company’s “Subscribe and Thrive” program have allowed it to report the highest annual revenue margins in its 48-year history.

NATR has gained 174.6% over the past year, 32.4% year-to-date.

Here’s what we think could drive NATR’s performance in the near term:

2021 Nutrition Industry Outlook

The nutrition industry gained good traction amid the coronavirus pandemic as people quickly became more health conscious in response to their less-active remote lifestyles. Furthermore, , because  restaurants were  closed during the first part of last year, people resorted to healthier eating alternatives. The clinical nutrition market is projected to rise at a CAGR of 7.2% over the next three years to hit  $52.76 billion. For perspective,  the human nutrition market is expected to grow at a CAGR of 6.6% over the next five years to reach $465.40 billion.

Impressive Growth History and Profitability

NATR’s revenue and ebitda have increased 6.4% and 20.6%, respectively,  year-over-year. Its EPS has increased 214.7% from its year-ago value. The company’s revenues increased 11% year-over-year in its  last reported quarter (ended December 31, 2020) to reach an all-time high of $101.70 million.

Historically, NATR’s  levered free cash flow has  risen at a CAGR of 66% over the past three years, while its tangible book value and total assets have improved at CAGRs of 9.4% and 8.5%, respectively, over this period.

NATR’s trailing-12-month gross profit margin of 73.71% is more than double the industry average 35.63%. Its return on sales and levered free cash flow margin of 5.54% and 8.22%, respectively, are significantly higher than industry averages.

The company’s ROE and ROA of 14.99% and 8.55%, respectively, compare favorably with industry averages.

Relative Undervaluation

In terms of trailing-12-month p/e, NATR is currently trading at 18.22x, 24.7% lower than the industry average 24.22x. The company’s trailing-12-month ev/ebitda and price/sales multiples of 10 and 0.99, respectively, compare favorably with industry averages.

Also, NATR’s trailing-12-month price/cash flow ratio of 10.25 is 22.1% lower than the industry average13.15.

POWR Ratings Reflect Rosy Prospects

NATR has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each weighted to an optimal degree.

NATR also has an A grade  for Quality and Value, and B for Growth. These are justified, given the stock’s discounted valuation, robust profitability and growth history.

Of the 12 stocks in the B-rated Medical – Consumer Goods industry, NATR is rated #1. In total, we rate NATR on eight different levels. Beyond what we’ve stated above, we have also rated NATR for Momentum, Stability, and Sentiment. Get all NATR Ratings here.

There are six other stocks in the Medical – Consumer Goods industry with an overall rating of A or B. Click here to view them.

Bottom Line

NATR’s impressive performance amid the COVID-19 pandemic demonstrates the company’s ability to capitalize on the industry tailwinds. Its  improved digital and manufacturing capabilities and its healthy fundamentals should allow it to achieve  fresh highs this year. NATR launched a $15 million share repurchase program last month, which should amplify the company’s earnings per share.

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NATR shares were trading at $20.36 per share on Tuesday afternoon, up $0.56 (+2.83%). Year-to-date, NATR has gained 36.19%, versus a 9.09% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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