USANA (USNA): Buy, Sell, or Hold Post Q4 Earnings?

What a brutal six months it’s been for USANA. The stock has dropped 32.2% and now trades at $21.47, rattling many shareholders. This might have investors contemplating their next move.

Is now the time to buy USANA, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is USANA Not Exciting?

Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons there are better opportunities than USNA and a stock we'd rather own.

1. Revenue Spiraling Downwards

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. USANA’s demand was weak over the last three years as its sales fell at a 2.5% annual rate. This wasn’t a great result and signals it’s a lower quality business.

2. Fewer Distribution Channels Limit its Ceiling

With $925.3 million in revenue over the past 12 months, USANA is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

3. EPS Trending Down

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for USANA, its EPS declined by 18.8% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

Final Judgment

USANA isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 10.6× forward P/E (or $21.47 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.

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