Trader J - Group Project - I think NBTY qualifies as a "recently beaten up and left for dead, issue" Here's why:
Chart: The stock was over $20 last July. It has fallen, now below $5, a level not seen since 10/96 (full-year sales for 1996 were $194 mil., sales for the most recent quarter were $168 mil.) The stock has "flatlined" since March, and has stopped reacting to bad news. Downside would appear minimal.
Reason for the Fall: Several stocks in the vitamin/supplement market were beaten up last year. After strong growth, sales and profits took a dip. There were/are concerns of competition from the likes of Wal-Mart. There was the small-cap malaise. Also, in the case of NBTY, short-term profits would be effected by expansion plans.
Recent Y/E Results: For the year ending 9/98 revenue was up 61% (partially due to acquisitions) while diluted EPS rose 33%.
Recent Quarterly Results: On 4/27 co reported that revenue increased 7% while EPS decreased 60%. The stock dropped 1/16 in anticipation of the report (shortfall was pre-announced) and another 1/16 the day of the report. Thus it would seem that the stock has bottomed.
Why should it increase from here: The company is expanding. They introduced 100 new products last year and they intend to increase their U.S. retail stores from 250 at Y/E 1998 to 1000 by Y/E 2001. They claim to be achieving higher per store sales than competitors. The co. is vertically integrated. They manufacture more than 90% of the products they sell and they claim to be the industry's low cost producer. They also wholesale, with a customer list that includes Wal-Mart, CVS, Eckerd, Target and others. They sell by mail order and per their last annual report "Direct to consumer sales via the Internet is an integral element of our long-term growth strategy..." Insiders own 26% of the company. The most recent insider transaction was a purchase of 10,000 shares at $5 in March. The P/E is 10, Price/Sales is 0.6.
The primary market for vitamins/supplements are adults over 45 which is a rapidly growing part of the population and baby boomers are expected to be increasingly big users of these products as they age. So the long term prospects are good. It would seem like a safe stock to hold with the possible expectation that when they gear up their Internet sales, the stock could jump.
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