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Why Herbalife Stock Is Collapsing In 5 Charts

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Why Herbalife Stock Is Collapsing In 5 Charts
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The graphs below were produced by Capital Market Labs.

Herbalife Ltd. (NYSE: HLF) stock is down 16 percent in the last two years, 42 percent in the last year and 31 percent in the last two weeks.

While the company has received headline coverage because two famous billionaire investors agree to disagree on claims of fraud, and even the possibility of insolvency, there's a case to be made that Herbalife fundamentals are collapsing.

Here are five charts with facts.

Plotting net income (one-year growth in blue bars) and total assets (one-year growth in the red line), one can see that net income is shrinking, and assets are very close to seeing the same after realizing 40 percent year-over-year growth back in 2013.

cml_hlf_nigrowth_asetgrowth.gif

Extending the time period, investors can also see net income (two-year CAGR percentage) has collapsed from nearly 50 percent to now below negative 10 percent.

cml_hlf_ni2yrgrowth_ts1116.gif

It's not just growth numbers that are looking weak -- margins are also deteriorating. Below, one can see that EBITDA-over-total-revenue-margin-percentage has dropped by nearly one-third over the course of two years.

cml_hlf_ebira_rev_ts1116.gif

With asset growth tumbling, net income growth turning negative and margins collapsing, Herbalife's book value has turned negative.

cml_hlf_bookvalue_ts1116.gif

Finally, perhaps the most confounding chart is included below.

The blue bars are stock repurchases by Herbalife (the firm buying its own stock) over total assets, while the red line is net income (earnings). The rate of stock buybacks is up nearly 500 percent as net income has fallen by about 40 percent.

cml_hlf_buybacks_ni_ts1114.gif

Ophir Gottlieb can be found on Twitter @ophirgottlieb.

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