The earnings have pleased the analysts, and the stock has touched new highs. JPMorgan Cazenove has revised the PT from $52 to $59, and Credit Suisse has raised the PT from $50 to $58. However, the valuations are not that cheap anymore as the forward P/E is nearly 16. Price to book is 6, and price to sales is more than 2. The good part is that the fundamentals have so far managed to keep pace with the appreciation in the stock price. Companies of the stature of GNC command a premium, but there is room for caution if the stock goes higher from here. Though there may be occasional slippages in the future, the consistent performance over the years makes investors confident that the company will continue to perform well in the long run. The relatively high level of debt is a bit of a worry for the company. The current ratio remains pretty good indicating reasonably good liquidity position. The cash is not very high, and there have been declines in the recent quarter. In Q2, the revenues increased by more than 9%, and the EPS increased by 17%. The company expanded its retail presence in China by opening a standalone store in Shanghai as part of a multi-channel distribution strategy. For the first half of 2013, the EPS increased nearly 20% . The guidance was increased, and the company now expects an EPS of $2.83 - $2.88 for the full fiscal 2013, a 21% - 24% increase over the 2012 adjusted EPS of $2.33. The growth in the overall market is likely to support the company as far as the topline is concerned. Innovative products remain the key to success, and even smaller players like Chromadex (CDXC) have made an impact with products like the vitamin derivative Nicotinamide Riboside. The future for GNC looks better after the earnings, but one should keep an eye on the valuations.
