Nutraceutical has rewarded the investors with good returns over the last few months. It is up 48% over the last one year, and it has appreciated by 32% in 2013. The last quarter saw modest growth of 2% in the revenues, and the net income increased by nearly 15%. Sequentially, there were declines in both revenues and net income. The margins also declined sequentially. Over the longer term, the revenue growth has been good but the bottom-line growth has not been very consistent. The operating profit margin (ttm) is 13.5% while the net profit margin (ttm) is 8.22%. Despite the appreciation in the stock price, the valuations remain reasonable. The P/E ratio is below 13, and the price to sales is 1.04. The price to book is also 1.6 and EV/EBITDA is below 7. The debt is at manageable levels, and the cash on books is around $5.35 million. Growth in revenues is not easy as the vitamins / supplements market is extremely competitive. New products are launched by the existing competitors, and the barriers to entry for new companies are not high. The bigger competitors include Country Life, Enzymatic Therapy, Whole Foods Market (WFM) and Vitamin Shoppe (VSI). Even smaller research based companies like Chromadex Corporation (CDXC) develop innovative products to meet customer demands. Chromadex has recently launched some proprietary natural ingredients which are useful in weight management, skin care etc. Nutraceutical has a strong position in the market, and needs to introduce new products from time to time to increase the pace of growth. There is also a need to improve the margins, though it is doing better than many other players in the industry. Further appreciation in the stock will require marked improvement in the top and the bottom-line. Negative surprises and slippages may lead to a correction. Of course, the overall market sentiments will have an impact.
