Shares of this vitamin and wellness company have been beaten down, which may provide an opportunity to buy in at a significant discount.
GNC Holdings (GNC)
from Cabot Benjamin Graham Value Investor
GNC Holdings (GNC) is a specialty retailer of health and wellness items. These include vitamin, mineral and herbal supplements, and sports nutrition and diet products. GNC has more than 8,500 locations, including 6,300 retail locations in the U.S. of which 1,012 are franchise stores and 2,215 are Rite Aid franchise store-within-a-store locations. Franchise operations are situated in 54 countries.
GNC’s Gold Card rewards program has boosted customer purchases by providing members with significant savings. In 2014, GNC will be able to track customer purchase data and offer personalized promotions and discounts. Also, GNC is expanding its store-within-a-store and e-commerce presence in China. GNC’s expansion is producing excellent results and offers substantial opportunities for the company.
Sales increased 10% and EPS surged 25% in 2013. I expect sales to advance 12% and EPS to climb 20% to 3.43 in 2014. The 16.7 current P/E is reasonable compared to GNC’s estimated five-year EPS growth forecast of 16.5%. The company’s balance sheet is solid, the dividend yield is 1.3%, and GNC’s shares are Medium Risk.
The share price will likely reach my Min Sell Price of 74.39 within one to two years.
J. Royden Ward, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745-5532, March 13, 2014