Analyst Ramey Appears on CNBC to Talk Herbalife; CNBC's Herb Greenberg Skeptical

Earlier on CNBC, analyst Tim Ramey appeared on the network to discuss Herbalife

. Previously, CNBC's Herb Greenberg had raised some questions about the company on Fast Money and in a

. Ramey called the company high quality with tremendous growth potential. He stated that he had a price target on HLF shares of $90--which would represent a substantial increase over the current price. Ramey stated that the company is growing quickly around the globe. He also noted that Herbalife has no debt and has a strong cash flow profile. In addition, the company's dividend is up over 100% year-to-date. Still, CNBC's Herb Greenberg posted an

on CNBC.com questioning how the company is representing itself to Wall Street. Greenberg points out that despite HLF's strong track record of creating shareholder value, the company is still a glorified multi-level marketing enterprise which is attempting to portray itself to investors in the most flattering light possible. Greenberg notes that in a recent appearance on Mad Money with Jim Cramer, Herbalife's CEO Michael Johnson said that HLF has "a terrific team in here of doctors, scientists, researchers, doing research around the clock in this company." Despite Herbalife's frequent touting of their in-house research programs, however, the company does not break out these expenditures in its R&D disclosure. In fact, in Herbalife's 10-K, it states that "research and development costs were expensed as incurred and were not material." This raises an obvious question about how HLF is representing itself: If the company's R&D pipeline and capabilities are so great, then why would it state that its R&D costs were "not material" in its 10-K? In response to Greenberg's inquiries about how R&D expenses are handled at Herbalife, a company spokeswoman offered the following explanation:

Herbalife added that its internal product development expenses are "either in our financial reports as SG&A or an inherent part of our cost of goods sold," but they "are not specifically called out as research and development in our public filings."

- He argues that Herbalife is likely not spending very much money on internal R&D, which runs into the hundreds of millions at other major multinational food and personal care companies. If true, this explanation would seem to account for the company's bizarre handling of R&D expenses in its financial statements. If this is the case, it would follow that investors should not be attaching very much value to HLF's product pipeline and research capabilities but rather understanding the company for what it really is - a hyper-successful multi-level marketing enterprise. It is not difficult to understand why HLF would be attempting to transcend this label, as the MLM segment has frequently been associated with shady operators and is not exactly glamorous. Neverthless, HLF has built an extremely impressive business within the MLM context and, undoubtedly, there are many consumers that are happy with its products. For the company to portray its operations as being comparable to other major multinational food and personal care companies, however, would seem to be slightly disingenuous. For example, HLF sells its products through 2.7 million "distributors" who are mostly individuals introducing the products to family and friends. The company only sells its products through retail outlets in China - a big difference between HLF and many of the other players in the food and personal care business. Herbalife also uses primarily third-party manufacturers, which contrasts with more traditional companies. These distinctions are important for investors who maybe are not completely familiar with the Herbalife story. This is a great multi-level marketing company, but there are quite a few differences between HLF and its more traditional competitors in the food and personal care sector.