StocktoberFest – Horowitz & Company’s QFT Analysis on Herbalife (HLF). 
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BONUS STOCK – Earnings due 10/31/11 after market
Here are the important facts and levels to consider:
- Consensus estimates are for $0.75 per share EPS on $845.25 of revenues.
- Next period the consensus estimate is $0.74 per share with $861.12 of revenue.
EPS surprises over the past few quarters have ranged from 3% to 31% better than estimates. When positive surprises are not more than 5%, shares often sell off. So, look for $0.85 or better for shares to move higher.
Shares are now closing in on an all-time high and there is obviously no overhead resistance. The 50 DMA is $55.57 which will serve as institutional support. On the downside, there is good volume support at $60, $57.90 and $56.31. All can be considered points of entry for a “bounce” on earnings news.
The lower band of support will come in much lower at $51.25, then $48.75. Expectations are high and the company needs to deliver.
The above are short-term trading guidelines, below are more pertinent details regarding fundamentals and the longer time-frame technicals.
Horowitz & Company’s proprietary Technical Scoring System (T|score) takes into consideration both individual security technicals as well as the overall market direction when considering whether or not to purchase a company. H&C’s Market Trend Indicator (MTI) is a measure which is designed to evaluate the overall trend in the market. There are four designated levels to assess the trend which include: Strong Downtrend, Downtrend, Rally and Strong Rally. We are currently in an environment where the MTI is in a Strong Rally. All of our indicators are showing that the markets are in a strong rally and risk is back on. Investors of all risk tolerances may consider moving to a higher level of equities while still looking to pick up companies with increased levels of technicals. With that said, this stock ranks in the highest percentile of stocks from an individual security technical score. H&C would consider purchasing a small portion of this position even during a Strong Downtrend. This position would be a definite purchase if the market were to be in Downtrend or any kind of Rally.
Below are some of the areas where Herbalife Ltd (HLF) excelled or detracted from the value of the technical score:
Stochastics are currently showing some bearish attributes which may mean this stock is slightly overbought in the short run.
In terms of price and volume especially over a short period of time it is important to see if there is any weight behind either a rally or correction. This company has shown to have good price action in terms of volume and therefore has a greater chance to move higher if the overall market and economy are to continue to trend higher. Higher volume with positive price also will provide support levels for this position if it were to decline back to these levels.
On a 12-month rolling period this company has performed very well when comparing against its peers and equities in the S&P 1500. We see this as a positive sign for this company as it shows strength relative to the overall market
H&C currently sees Herbalife Ltd (HLF) in a Short Term Uptrend and Long Term Uptrend.
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Horowitz & Company’s proprietary Fundamental Scoring System (F|score) takes into consideration many factors related to each company’s financial history and outlook. This system is oriented toward a growth model and therefore will give a higher score to those companies which continually show increasing earnings per share and revenue over time. Over the long-run (and when looking to purchase a security) we prefer companies with a track record of growth and solid fundamentals. In the short-term however, it is price / technicals that pay. When investing, we combine both of these analyses to seek out possible investment opportunities within our universe of stocks.
This stock ranks very highly with regard to fundamental factors and could be considered a candidate. See below for details on where this company thrives and possibly some of its drawbacks:
We find that EPS Growth on a Quarter over Quarter basis is one of the strongest components when screening for growth stocks. Continued EPS Growth in a company generally shows strength in leadership, the ability to manage expenses and improve the bottom line.Over the last three quarters, this company has done exceptionally well producing EPS Growth Rates last quarter, 2 quarters ago and 3 quarters ago 35.38%, 44.90%, 50.57% respectively.
Revenue Growth similar to EPS Growth is also a strong component to consider when screening and scoring for growth companies. Continued growth in revenue shows that the company is innovative, marketable and its products remain relevant in the marketplace.Over the last three quarters, this company has not done as well producing EPS Growth Rates last quarter, 2 quarters ago and 3 quarters ago 27.71%, 28.52%, 17.04% respectively.
The 5 Year EPS Growth Rate has added to the fundamental score with a value of 29.55
Last quarter this company reported Earnings Per Share 17.65% better than analysts had expected. We believe this surprise although only for one quarter could set a trend for future earnings reports and guidance.
Price relative to earnings growth is commonly referred to as the PEG Ratio. This company may contain added value as it’s PEG Ratio is 1.40. We generally would like to see the PEG ratio under 1.5 and it is even better if it is under 1.0.
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Looking to invest in The Disciplined Investor Managed Growth Strategy?
Click HERE for the virtual tour….
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