TheStreet recently upgraded GNC from hold to buy. As per the report, the change is based on the company’s strengths like its solid stock price performance, impressive growth in revenue, net income and EPS, and good return on equity. This upgrade follows other such upgrades by Deutsche Bank and Goldman Sachs. The price targets range between $47 and $50 which gives a good 18-25% upside from the current levels. Meanwhile, the uptrend is continuing. The stock has had a good run in the past 3 months where it is moved about 30% from the 52 week lows ($30.92 on Jan 3). Even the 52 week change has been around 12% which gives the same returns as S&P500. It hit the 52 week high on February 19 ($42.83) and it seems that same is likely to be challenged again soon. For that it will have to cross $40 level with volumes. This is the 50DMA. The stock is trading above its 200 DMA of $37.11 which has provided support recently. The volumes have been low recently as the 10 day average is 1.29 million shares compared with the 3 month figure of 2 million. The last quarter was good with a quarterly earnings growth in excess of 25%. The revenues also went up by more than 10%. The high debt / equity ratio of 125 is a matter of concern, and the price to book is also a little high at 4.46. However the P/E is 17.29 and the forward P/E is around 12 indicating expectations on growth. Even the PEG is low at 0.77 indicating that the stock may have a decent upside over the years. Sales to market cap reasonable at 1.62. The market for nutritional supplements is growing. In other segments also, new products are coming to the market all the time like the recent launch of a low caffeine energy drink Purenergy by ChromaDex Corporation (CDXC). GNC may need to diversify into other such segments of the Vitamins / supplements markets to gain access to the growth potential available there.
