About Nu Skin Enterprises
I feel like more and more people have found themselves enveloped in some form or fashion of a multi-level marketing (MLM) scheme of sorts, which makes sense given the exponential expansion of social media blended with the shorter amount of patience the younger generations maintain, for instance, as it relates to attaining financial freedom, among other things.
Prior to even drafting this stock analysis article, we did some research on practically everything that an MLM is, how it works, how it wraps people into its respective web and the impacts, both positive and negative it has had on people’s lives.
Throughout this research, we discovered a few different things, including the fact that while MLMs seem a little icky at face value, they are technically, in their base form, not illegal, as opposed to pyramid schemes, which are in fact illegal.
Through some research done through YouTube University (yeah, we made that up and it actually might exist, but please don’t come after us, Google), many who are experts on the subject matter generally claim that the primary difference between an MLM and a pyramid scheme is that in an MLM, there is an actual product that is being sold, whether it is insurance or a hairbrush, while in a pyramid scheme, maybe a certain product or outcome is promised but it is never actually sold or delivered, so, in essence, nothing is being sold except for the air that comes out of the scammer’s lungs.
Multi-level marketing is basically filled with organizations heavily recruiting impressionable people (usually young and/or poor people) through flashing a few big financial figures, a super fancy sports car and a few huge houses saying that they too can earn this much money through their work at the MLM in question and achieve their dreams of being their own boss.
That’s like how Dashers say they’re their own bosses; it’s hilarious. It sounds too good to be true.
Because it pretty much is.
They conveniently tend to neglect mentioning that achieving this dream (which is just a ploy by the MLM in question, by the way) is filled with cold calling and incessantly pestering your closest friends, family members, confidants and basically any single person you have met or even vaguely interacted with and attempt in a semi-aggressive manner to buy your products (really, the MLM’s products) and tell their friends and their friends’ kids and their kids’ dogs while they’re at it.
But you are your own boss in this scenario, right?
Yeah, right.
If any one of the aforementioned entities actually wants to pay for said product or program you will likely receive an embarrassingly small cut of what the actual business owners (the leaders of the MLM) receive while exerting little to no effort themselves.
This is admittedly one of the few dark corners of capitalism.
This straight up sucks, but hey, business is business and if there is a market to be made, there’s an opportunity for a few at the top to make a lot of money and that is essentially the case with every single MLM that exists today.
Perhaps, including the MLM in question today, a skincare and cosmetics product seller headquartered in Provo, Utah by the name of Nu Skin Enterprises.
We want to make it unequivocally clear that we aren’t saying that this company is a scam, however, it is actually (among a variety of sources on the internet) an MLM company, relying heavily on members of the entity to recruit other members to sell its products.
While there is a lot (and we seriously do mean a lot) that is said (and can be said) about this company and its questionable business practices on the internet (i.e., in recent years the company settled a lawsuit overseas in which it was alleged it was operating a pyramid scheme for $47 million), it is clearly the case that many folks deeply care about the condition of their skin and their general beauty, especially when it comes to those who are aging and want to do any and every thing in their power to reverse the aging of, say, for example, the skin on their face.
Therefore, we think this company is somewhat recession proof in that respect.
With everything that surrounds this company, it’s only right that we dive into its core financial figures and other pertinent ratios so as to determine whether or not this company’s stock (NYSE: NUS) is the right one to consider adding to your personal investment portfolio.
Nu Skin’s stock financials
Coming in at a share price of $26.86, a price-to-earnings (P/E) ratio of 19.48 with a market capitalization of $1.34 billion all while distributing an annual dividend of $1.56 to its shareholder base, Nu Skin is off to a more than fine start given that its shares (NYSE: NUS) appear to be trading at a small discount relative to their actual, intrinsic value given that its present P/E ratio is trading at less than the standard, fair value benchmark of 20.
Also, an annual dividend hardly hurts, especially when it is relatively sizable as is the case with Nu Skin’s, so long as it can afford to continue issuing said dividend.
In the spirit of learning more about the financial innards of Nu Skin, according to the company’s balance sheet (as displayed on TD Ameritrade’s platform), Nu Skin’s executive team is tasked with taking care of around $1.8 billion in terms of total assets along with $924 million in terms of total liabilities.
This is also a positive, from our vantage point, as this company evidently has enough total assets to cover the aggregate amount of its total liabilities, largely setting aside any concerns we may have originally had with respect to this company sitting on too much inventory or not operating off of a solid financial base, which it seemingly is.
With respect to Nu Skin’s income statement, the company’s total annual revenues in recent years (specifically starting in 2018) have remained just about as stable, consistent and boring as possible, remaining at just about $2 billion each year, which speaks largely to this company’s seemingly innate ability to keep its head well above water when recessionary and supply chain-related pressures were mounting across multiple companies as well as multiple sectors and industries.
This business, from a sales standpoint, operates a much more consistent business than we had initially presumed.
As it relates to the company’s cash flow statement, both Nu Skin’s net income and its total cash from operations have remained consistent and positive during the same time frame (i.e., since 2018 as well), which implies that with a strong ability to generate consistent revenues comes an equally strong ability to produce stable cash flows from its operations as well.
Nu Skin’s stock fundamentals
This being the case, it might be fair to assume that this company isn’t all too foreign to being able to turn out a sturdy trailing twelve month (TTM) net profit margin either.
Let’s see.
According to the figures currently displayed on TD Ameritrade’s platform (at the time of this writing), Nu Skin’s TTM net profit margin stands at 3.68% to the industry’s respective listed average of 3.49%, which indicates to us that Nu Skin operates in a rather competitive industry, but with respect to the cutthroat competition, it has still managed to come out on top (even if not by all that much), which certainly brings us some satisfaction as potential investors, however, it still can objectively be noted that both of these TTM net profit margins aren’t all that high at all, which might be a result of both being scaled as well as having to give a cut of practically each of its sales to its MLM warriors.
We mean salespeople.
Additionally, it can also be found (again, on TD Ameritrade’s platform) that the company’s TTM return on assets stands at 4.17% to the industry’s listed average of -0.32% as well as its TTM return on investment(s) standing at 5.43% to the industry’s respective average of 3.89%, which are also positive indications that this company is gaining more from the investments it is making (that is, relative to the competition) and it is also extracting more value from the assets it employs as well.
Should you buy Nu Skin stock?
Although this is sort of a tough one given what we have read and reviewed regarding MLMs, the numbers don’t lie (well, most of the time, anyway) and these numbers sing a resoundingly melodious tune favoring one to perhaps consider an investment in this company through its stock (NYSE: NUS).
While there is plenty of competition in this space, its TTM net profit margin and its core TTM return metrics trump those of the industry’s respective averages, its balance sheet is in great condition overall, its revenues have been as consistent as all get out, even amidst the variety of external pressures imposed on this company (among others, of course) and its cash flows have been solid as a rock as well.
From the perspective of the aforementioned figures, there really doesn’t seem to be a whole lot to complain about when it comes to Nu Skin.
Nevertheless, one might want to defer to their conscience on this one and consider the fact that this company (more than likely) does employ some business tactics that may be frowned upon and, in addition to selling skincare products it is also in the business of selling the promises of dreams and lifestyles that aren’t likely to ever come into fruition for the bottom 99% of this MLM company.
At the end of the day, financials alone, this company has a lot of positives and we think it is worth rendering its stock a “buy” rating at the moment.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.