GNC Holdings (GNC)
From Cabot Wealth Advisory 9/17/13 Sign up for free Cabot Wealth Advisory
The following four guidelines are part of the eight-guideline strategy that I use in Cabot Benjamin Graham Value Investor. You can easily find my complete analysis and latest buy recommendations in the Investor, but here is a partial list:
1) Free cash flow more than $20 million.
2) Return on equity more than 15%.
3) Positive earnings growth during the past 5 years with no deficit.
4) Dividends currently paid.
I screened my Benjamin Graham Common Stock Database and found this high-quality company that fit my criteria. It's a leader in its sector, and has excellent future prospects.
GNC Holdings (GNC) is a specialty retailer of health and wellness items, including vitamin, mineral and herbal supplements, and sports nutrition and diet products. GNC has more than 8,300 locations, including 6,200 retail locations in the U.S. (958 franchise stores and 2,190 Rite Aid franchise store-within-a-store locations.) Franchise operations are situated in 55 countries.
GNC’s new Gold Card rewards program has been a huge success, although the introduction of the card was costly. The Gold Card provides members with significant savings and could help boost sales and earnings during the next several quarters.
GNC’s expansion of its store-within-a-store and e-commerce presence in China offers substantial opportunities for the company. Sales increased 10% and EPS surged 23% during the last 12 months.
I expect sales to increase 11% and EPS to climb 20% to 3.05 for the 12 months ending 6/30/14. The 21.5 current P/E is somewhat high, but GNC’s growth is impressive. The company’s balance sheet is solid, the dividend yield is modest, and GNC shares are medium risk. The share price will likely reach my Minimum Sell Price of 78.98 within one to two years.
I will continue to follow GNC and other blue-chip, high-quality companies in Cabot Benjamin Graham Value Investor. My October issue will include new undervalued Graham-Buffett type stocks. I hope you won’t miss it! Click here for more information.
|GNC Holdings (GNC)
300 Sixth Avenue
Pittsburgh, Pennslyvania 15222
|Index Membership: N/A
Industry: Drug Stores
Full Time Employees: 6,000