> Note: the graphs included in this article were sourced from Pershing Square Capital Management’s initial presentation on Herbalife, available here.
Bit of a submarine there, eh? Anyway, this doesn't make a case against Herbalife. In fact, it suggests that their data is saying the opposite. Look at the part where they talk about popping:
> Along with Japan and Israel, this same pattern shows up in Spain, France, Germany and several other countries that Herbalife has entered.
Now look at their chart of # of countries against revenue. Herbalife is apparently up to almost 80 countries. Even back in the '90s, they were in 20-50 countries. Let's be generous and say that 'several other' is 5 (I don't have the patience to go through Ackman's propaganda), and note that this will be an exhaustive list since it's being assembled by people with literally hundreds of millions of dollars of incentive to make the picture look as ugly as possible; that's 10 countries that 'popped'. Out of 80. If the other 70 have not popped, that does not seem like Herbalife will have problems in the future.
(There's also the problem that if each country can only be soaked for a short period before 'popping', revenue should not be regularly going up! It should be flattish as Herbalife desperately opens up ever more countries to replace disappearing revenue from the popping countries.)
I've found a good rule of thumb in business is that you can only be successful in the long run if your value proposition is a win-win-win for you, your suppliers, and your customers.
When a majority of your customers are being unknowingly screwed over as you reap a huge amount of unnecessary producer surplus, it's a losing proposition in the end. Companies like Herbalife can just do it on a scale where it takes a long time to fizzle out.
MR CHIMP; the standard list of equity valuation tools.
Management Quality:
If you read the really long presentation linked to in the article, they seem competent, but sketchy.
Retained Earnings:
I have no idea.
Competition:
Direct selling shitty looking health shakes? The seem to be reasonably well established.
History:
It's been applying the same trick all along. Not much to go on here.
Input Costs:
Well under control. Good.
Market Differences:
They seem to be quite good at entering into different markets, so this goes well for them. It might be interesting if they could diversify their product lines.
Product Quality:
Problem here, as I don't see what distinguishes them other than sales talent.
Quick PEST analysis:
Polictical:
Problem. It's could be described as a pyramid scheme.
Economic:
Economy seems to be picking up, and it does not strike me as a good that swings too much with the economy. However, they could have problems recruiting sales staff in a better economy.
Social:
Health food is a trend that I think will continue.
I don't know why you're getting downvoted. I noticed that as well. I do believe Herbalife is a pyramid scheme, but the data doesn't support that it's popping. If it were, revenue by country would stay relatively flat, or the relationship would be sublinear.
I think there are other countries that had problems and they did not listed them all.
For example I live in Brazil, I saw Herbalife going all the rage some years ago, then I saw people getting fat all the rage (ignoring whatever health claims Herbalife makes, when you take MORE food, whatever food it is, even if it is lean food, you still get MORE calories... eating your food + herbalife will make you fatter...), then people got upset with Herbalife results and dumped it.
Also I remmber very clearly that the most strong users were also the strongest sellers, the "end-buyers" usually bought only once.
> I think there are other countries that had problems and they did not listed them all.
Again, that's seriously unlikely. Ackman & co have literally hundreds of millions of dollars worth of incentive to list every country they can where Herbalife has failed. If anything, we should expect their list to be inflated & overstated.
> then people got upset with Herbalife results and dumped it.
So? That's like people talking about how they've dumped Facebook; what a few people think may bear little connection to reality. It's like Yogi Berra said: 'no one goes there anymore, it's too popular'.
Bit of a submarine there, eh? Anyway, this doesn't make a case against Herbalife. In fact, it suggests that their data is saying the opposite. Look at the part where they talk about popping:
> Along with Japan and Israel, this same pattern shows up in Spain, France, Germany and several other countries that Herbalife has entered.
Now look at their chart of # of countries against revenue. Herbalife is apparently up to almost 80 countries. Even back in the '90s, they were in 20-50 countries. Let's be generous and say that 'several other' is 5 (I don't have the patience to go through Ackman's propaganda), and note that this will be an exhaustive list since it's being assembled by people with literally hundreds of millions of dollars of incentive to make the picture look as ugly as possible; that's 10 countries that 'popped'. Out of 80. If the other 70 have not popped, that does not seem like Herbalife will have problems in the future.
(There's also the problem that if each country can only be soaked for a short period before 'popping', revenue should not be regularly going up! It should be flattish as Herbalife desperately opens up ever more countries to replace disappearing revenue from the popping countries.)