Should You Think About Buying Nature's Sunshine Products, Inc. (NASDAQ:NATR) Now?

Nature's Sunshine Products, Inc. (NASDAQ:NATR), is not the largest company out there, but it saw a decent share price growth in the teens level on the NASDAQCM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Nature's Sunshine Products’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Nature's Sunshine Products

What Is Nature's Sunshine Products Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Nature's Sunshine Products’s ratio of 16.15x is trading slightly below its industry peers’ ratio of 18.41x, which means if you buy Nature's Sunshine Products today, you’d be paying a reasonable price for it. And if you believe Nature's Sunshine Products should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Nature's Sunshine Products’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Nature's Sunshine Products look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -14% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Nature's Sunshine Products. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, NATR appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on NATR, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on NATR for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on NATR should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Nature's Sunshine Products at this point in time. While conducting our analysis, we found that Nature's Sunshine Products has 1 warning sign and it would be unwise to ignore it.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.