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GNC Holdings Inc. Message Board

  • fla1717 fla1717 Feb 18, 2012 6:28 PM Flag

    GNC: Good Company, But Overvalued

    GNC appears to be a well-run company, whose proprietary products are a lot better than they were 5 years ago. Unfortunately, though, its stock is overvalued.

    Let's assume you're willing to buy a house for $300,000. If you must also assume a $100,000 debt of the departing seller, though, you'd obviously now only pay $200,000 for that house. Same concept with GNC - they have over $1.2 billion in long-term debt. Just as in calculating the purchase price with $100,000 of debt attached to the house, you must also calculate the valuation of GNC with $1.2 billion of debt attached to the company.

    GNC had $132 million of Net Income in 2011. So a 35 multiple of 2011 Net Income? A less than 3% earnings yield? No thanks.

    Also, domestically speaking, there are around 900 franchise stores and 2,800 corporate-owned stores. Run the math: there is much more operating income per franchise store than per corporate store. So why oh why is management attempting to open 125 corporate stores but only 15 franchise stores? Almost 10 times as many in the completely wrong direction, it seems.

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    • A growth company with a PEG of less than one(1) is also a value buy, all day every day. GNC has a .75 PEG which makes it a very good buy right now, and especially so the last couple of days.

      I added quite a bit more today at $34.10.

    • Lucky shareholders for the lst $15, Gold $15.

    • Your crazy i can see your point man but look at the PEG ratio, GNC Is also a growth story so you will pay higher for these companies just like BWLD

    • Secondary IPO at 33.50. Is it a buy? Anybody please?

    • Fla1717.....How about today's action and announcement?

    • And here come the selling shareholders today, 17 million shares

    • Yes, they have plenty of debt but the company makes plenty of money so the debt is not a burden.

      GNC is not at all overvalued, in fact it's selling at a discount to it's growth rates. These analyst estimates of $1.85 for this year are too low, and previous year was $1.52. Probably comes in more like $1.95-2.00 based upon the great numbers posted the last 2 quarters. So a 16 forward p/e for a 30% grower is hardly overvalued, and is in fact quite cheap.

      This trend with more and more people taking supplements will just continue as the population ages. I am 52 years old and just had my first health issue, and sure enough I started buying supplements for the very first time. That's what turned me on to buying GNC. Lots and lots of people like me.

    • New Shareholder here-- I liked your message, but have to say a bit flawed. First off-- yoyou lost me on your house-buying analogy, Nobody shops for a house based on the 'total price they'll pay'-- if I want a 300k house...i buy it...i don't only look at price tags of 200k if i'm ok spending/borrowing 300k.

      Secondly-- just as in with houses, you can't make a solid 'future' calculation based on current data. In Lehman's terms, if GNC suddenly goes gang-busters for the next 5 years...their current debt level/ratio suddenly makes very little difference.

      I decided to buy GNC for 2 reasons. #1 their longivity-- they've been around a long time and are continuing to move in the right direction-- it wasn't like they went public because they are dying on the vine. #2 is because I believe in the sector vastly outperforming almost all other areas, including other forms of retail. As we become more and more unhealthy, and more and more a 'pill' culture-- this stuff is just gonna keep leaping off shelves.

      That said, I remain strongly torn whether GNC or VSI was the right play and perhaps should have just gotten some of both. Tipping point was the a couple things-- one is cash on hand-- while no debt, VSI only has 10M...i like GNC having 100+M on hand. Secondly is the dividend and the longer-term reliability it represents.

      BTW-- I show GNC total debt down to 900M from your that means GNC is clearing a couple hundred million of Debt off it's books even each year...we're only a few years away from HUGELY higher than 3% growth you infer.

      Prediction-- 12/31/12 GNC= $48/share

      GL to all!

    • Interestingly you are using only one criteria being the debt situation of GNC.
      We can qualify GNC in the category of growth stocks. P/E's of growth stocks can run 30 or even higher. The current P/E of GNC is 25 measured on the earnings of 2011. The growth of earnings for the coming qtr is estimated @ 44%........for the current yr 2012 25%.
      If you compare the P/E of GNC with the category Retail/Speciality stocks like ULTA/PETM/VSI/SBH/LUX......GNC is more or less rated in the middle of the pack.
      Technically the stock is now @ a very strong buy now and fundamentally the stock looks very strong too.
      So my conclusion GNC has the right value and will soon break out of tight trading pattern between 31 and 34 and will go higher.........

51.16+2.45(+5.03%)11:04 AMEDT