Does Nu Skin Enterprises, Inc.’s (NYSE:NUS) September Stock Price Reflect Its Future Growth?

Nu Skin Enterprises, Inc. (NYSE:NUS) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of $40.62 is based on unrealistic expectations. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for Nu Skin Enterprises

Has the NUS train slowed down?

Analysts are predicting good growth prospects for Nu Skin Enterprises over the next couple of years. Expectations from 6 analysts are bullish with earnings per share estimated to surge from current levels of $2.247 to $3.708 over the next three years. On average, this leads to a growth rate of 10% each year, which signals a market-beating outlook in the upcoming years.

Is NUS available at a good price after accounting for its growth?

NUS is trading at price-to-earnings (PE) ratio of 18.08x, which suggests that Nu Skin Enterprises is undervalued based on its latest annual earnings update compared to the Personal Products average of 21.84x , and overvalued compared to the US market average ratio of 17.32x .

NYSE:NUS Price Estimation Relative to Market, September 3rd 2019
NYSE:NUS Price Estimation Relative to Market, September 3rd 2019

Nu Skin Enterprises’s price-to-earnings ratio stands at 18.08x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, to properly examine the value of a high-growth stock such as Nu Skin Enterprises, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 18.08x and expected year-on-year earnings growth of 10% give Nu Skin Enterprises a higher PEG ratio of 1.74x. So, when we include the growth factor in our analysis, Nu Skin Enterprises appears a bit overvalued , based on fundamental analysis.

What this means for you:

NUS’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are NUS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has NUS been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of NUS’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.