GNC Holdings, Inc. (NYSE:GNC) is on a growth trajectory on the back of strategic developments.
This leading global specialty retailer of products for health and wellness, which include vitamins, minerals and herbal supplement as well as sports nutrition, has a market cap of $120.07 million.
Considering some factors, investors should retain this Zacks Rank #3 (Hold) stock for now.
Strategic New Partnerships: GNC Holdings’ recent strategic joint venture with a vitamins and nutritional supplement manufacturer — International Vitamin Corporation — looks promising. Moreover, the company has completed a transaction to form a joint venture with Harbin Pharmaceutical Group and strengthen presence in China’s large supplements market.
Expansion in International Market: During the last reported quarter, the company registered growth with several key franchise partners. Later in 2019, GNC Holdings plans on releasing first shipments to its recently signed partners in Australia and Japan later this year. As a major development on the innovation front, the company has converted an existing location in Shanghai to its first global showroom store.
Strong Balance Sheet: GNC Holdings exited the first quarter with cash and cash equivalents of $137.1 million, which skyrocketed nearly 104% from $67.2 million at the end of the 2018. Net cash flow from operating activities for the three months ended Mar 31, 2019 totaled $68.7 million compared with $25.1 million from the year-ago quarter’s level. This indicates promising return for shareholders.
Downsides
However, there are a few factors which have been impeding growth of the stock lately.
Dull Revenues is a woe: In the first quarter of 2019, revenues dropped 7% year over year. The decline was primarily caused by the transfer of the Nutra manufacturing and China e-commerce businesses to a newly-formed joint venture as well as certain closures under the store-optimization initiative.
Competitive Headwinds: In the United States, GNC Holdings competes for sales with heavily advertised national brands that belong to big pharmaceutical and food companies as well as other retailers. The company’s international competitors include large international pharmacy chains, major international supermarket chains and other major U.S.-based companies with international operations.
Due to these negative factors, the company has underperformed its industry. In the past three months, the stock has plunged 47.8%, against the industry’s 8.7% rise.
Key Picks
Some better-ranked stocks in the broader medical space are Cerner Corporation (NASDAQ:CERN) , Penumbra (NYSE:PEN) and Teleflex Inc (NYSE:TFX) . Each of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Cerner’s long-term earnings growth rate is expected to be 13.5%.
Penumbra’s long-term earnings growth rate is projected at 21.5%.
Teleflex’s long-term earnings growth rate is estimated at 13.7%.
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