Investment Thesis
Herbalife exhibits a fundamentally distressed capital structure with negative stockholders' equity of -$441.5M, liabilities exceeding assets by $400M, and $2.0B in long-term debt against only $61.9M in annual net income. Revenue growth is anemic at 0.9% YoY with net income essentially flat, while quick ratio of 0.74x signals liquidity constraints. Though operating cash flow remains positive, the company is overleveraged and highly vulnerable to operational disruptions.
Strengths
- Strong gross margins of 77.9% indicate pricing power and operational efficiency
- Positive operating cash flow of $113.8M and free cash flow of $102.9M provide debt service capability
- Quality of earnings evidenced by operating cash flow exceeding net income by 84%
Risks
- Negative stockholders' equity of -$441.5M indicates balance sheet insolvency and eliminated shareholder value
- Debt-to-asset ratio critically unfavorable with $2.0B long-term debt versus $2.9B total assets; interest coverage of only 3.0x leaves minimal cushion
- Revenue and earnings growth essentially flat (0.9% and 0.2% YoY respectively) while EPS declined 12% YoY, indicating stagnation with share dilution
- Quick ratio of 0.74x and current ratio of 1.23x signal near-term liquidity stress and limited financial flexibility
Key Metrics to Watch
- Operating cash flow trajectory relative to debt service obligations
- Debt covenant compliance and covenant amendment negotiations
- Revenue growth acceleration or further deceleration; any negative net income would breach equity solvency
Financial Metrics
Revenue
1.3B
Net Income
61.9M
EPS (Diluted)
$0.57
Free Cash Flow
102.9M
Total Assets
2.9B
Cash
451.2M
Profitability Ratios
Gross Margin
77.9%
Operating Margin
10.5%
Net Margin
4.7%
ROE
N/A
ROA
2.2%
FCF Margin
7.8%
Balance Sheet & Liquidity
Current Ratio
1.23x
Quick Ratio
0.74x
Debt/Equity
N/A
Debt/Assets
115.1%
Interest Coverage
2.96x
Long-term Debt
2.0B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T10:31:26.444323 |
Data as of: 2026-03-31 |
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