Vitamin Shoppe, Inc. (VSI)

[investora2z]

If one looks at the long term chart of VSI, the story is quite different from the story of the recent month. From around $18 in October 2009, the stock went to $65.93 in February 2013 (nearly 4 times in 3.5 years). After that, there has been a correction of more than 25%. The drop which started on the earnings day (Feb 26), had a lot of momentum. It broke through short term averages, and is presently quiet weak. It is trading below the 200 day moving average of $57 and the 50 DMA of $55. The results were okay and the management was pretty confident of the immediate future prospects. The strategy for 2012 included acceleration of new product development, improving online shopping experience, testing small market stores and expansion into Canada. Out of these, the key would perhaps be development of new products which can add volumes to the sales and also improve the bottom line. Companies like MusclePharm (MSLP) have grown from $1 million to $78 million from 2009 to 2012. Products like BluScience from Chromadex (CDXC) have been remarkably successful for the respective companies. There is no reason why VSI can not produce better products. If VSI is able to develop better products faster, the future can become even more bright. This is because this is a growing market, and the competition is increasing all the time. Acquisitions like that of Super Supplements in 2012 would help it in inorganic growth. With negligible debt on books and around $31 million cash (after paying for the Super Supplements acquisition), the company is comfortably placed for future capex. The performance in the last quarter and year indicates that the company is on track to continue on the growth path. The fall in the stock can be taken as an opportunity for buying with a long term horizon provided the stock starts to consolidate. Levels of $45 would could be an entry point.