RE: Natural Health Trends (NHTC)

Morning - I have been on this board, reading, for almost six months or so and really enjoy the conversation (and very glad Fools stepped up to squash the political thread).

I wanted to bring NHTC to folks attention (I do not have any position). It is a stock that Saul and I discussed, off board, back in March and has subsequently posted continuing strong growth, margins, income, etc.

A fool posted a very nice summary of its business last July:…

In the last full year comparison (2014 vs. 2013):
Rev: $124M versus $52M
Op Income: $20.8 vs. $4.2
Net Income: $20.4 (1.61 per share) vs. $4.1 (.36 per).

In Q1 of this year, it continued it’s growth and income trajectory captured here:…

Q1 Highlights:
Rev: $40.7 vs. $23M (76%)
Op Income: $6.9M vs. $3.1M (122%)
Net Income: $6.7M (.54 ps) vs. $3.1M (.26)
Total Distributors: up 14% at 62,010
Upped Dividend 50% to .03 (still small dividend but nice sign they continue to pay and increase)
Announced $5M buyback - need to remember announce versus actual but another good sign.

In the Fool note there were two red flags mentioned:

  1. OTC stock - Now - back in Feb 2015 moved to Nasdaq
  2. Liquidity, avg in July 2104 was $230k, now $325k. Still small but moving in right direction.

Mgmt Team - primarily located in Dallas, Tx. CEO and CFO have been with company great than 10 years = stability.

Today - has a market cap of roughly $450M with PE of 18 (last March when discussed with Saul it’s PE was roughly 10). However, still really good against growth rates and earnings power.

I welcome additional discussion on this as I continue to do some additional research.



Thanks Sox. I had a look at the numbers from the past 2 years. Just based on that I picked up a small position. I will have a look at the business in the next few weeks.


Today - has a market cap of roughly $450M with PE of 18 (last March when discussed with Saul it’s PE was roughly 10). However, still really good against growth rates and earnings power.

Yes, I just took their reported EPS numbers. Share based comp and other potential adjustments are negligible. Full year EPS growth is 217% giving it a 1YRPEG of 0.08. They have a lot of deferred revenue on the books but have already collected the cash. The CFFO over the past 8 quarters was…



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Thanks Chris - what I am trying to decipher is what is “wrong” with the company. The numbers are very impressive - almost too good.

Mgmt has been there for awhile - in searching their past I can’t find any red flags. They also seem, from listening to a couple of conference calls, pretty transparent.

Are they planning potential shell game like Herbalife? I don’t think so. BTW - I don’t think Herbalife playing that way.

The PEG is ridiculously low.


There’s a bunch of stuff that gives me pause on this one. First, it’s pretty small, market cap under $500M. Second multi-level marketing. I’ve not looked at their reports, but a typical risk with this business model is inventory gets loaded in the channel but is not sold to end customers. I’m not saying that is a problem here, just saying it could be. Third, major operations in China. I love China, my wife is Chinese, but when it comes to investing, tread lightly here. There’s a lot of potential for shenanigans. I’ll probably take a pass on this one despite the good numbers.

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Yes, the numbers look good. I haven’t looked beyond the numbers. I would look at:

  1. who audits the company’s financials
  2. why is the business in Texas but most of the sales in Asia
    3)yoy revenue numbers look good but last 3 quarters may indicate slowing??? Will the growth continue?
  3. examine the products, the market, growth of these, competitive advantage, value proposition, etc

For now I have a very small position.

I wonder if Saul isn’t in just because the stock is thinly traded or if there is another reason.


Numbers too good to be true plus China?

Numbers too good to be true.

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I’d have to echo what others have said. MLM based companies are really unappealing to me personally. Also still have a major distaste for Chinese companies after some big TMF Global Gains disastrous recs several years ago.

My in-laws are also Chinese and I love the people, much of the culture and speak marginally passable Mandarin. But my wife has some business connections there and even after decades of work together, we wonder constantly if this will be the time someone finally disappears with the money. They have a whole different way of viewing business in China.

Definitely passing on this one.


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52 week low: $5.80
52 week high: $35.54

Year to Date Stock Price Increase: 189%

Skin Care products (etc) sold as an MLM in the US, but most of it’s sales are via e-commerce in China.

Yikes. I don’t know much, but I know when to be cautious.

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I went through the NHTC 10K today and Q1 conference call transcript (the only one available on Seeking Alpha).

The company is not Chinese. They’re based in Dallas and primarily use manufacturers in the USA (but also in China, Korea, and Hong Kong), and are planning to open a second North American office in California.

They don’t do multi-level marketing in China, though they are trying to get a license to do so (and have been for many years). Instead, they sell to consumers via their website. They do use multi-level marketing in North America, Europe (Italy and Slovenia), Japan, Taiwan, South Korea, Russia/Kazakhstan/Ukraine, and Hong Kong.

The bulk of their revenue comes from Hong Kong (92% in Q1), which has really taken off. HK revenue grew 83% YoY in Q1, while revenue outside of HK grew 23% YoY. The company believes that most of the product sold in HK is being imported into mainland China, but the company believes it has been very careful to comply with all Chinese laws (and has an interest in doing so, as they’re trying to get a licenses in China).

North American business more than doubled YoY in Q1, though off a small base. But the company believes there’s a lot of potential to sell to Chinese Americans, and will begin experimenting with a retail presence to see if that gains traction. From the Q1 call:

We are working on a pilot program to open retail locations to better serve our local customer base, particularly targeting areas with large Chinese-American population. Our first location will be in Southern California and we are researching a similar project in British Columbia, Vancouver.

Total revenue grew 76% YoY in Q1, while net income grew 119%. Number of distributors (people selling products) grew 14% sequentially from Q4.

Interestingly, the company also pays a small dividend and has been doing share buybacks as well.

I need to think more about this company. Certainly the bulk of their business is from China, and China will play a very important role going forward. The company just opened a manufacturing facility there, will be increasing ad spend in China, and is working on those licenses. But I also like that they’re looking to increase North American revenue and exploring a retail concept.

There’s no doubt there’s a lot of risk here, and it may not be a good investment, but FWIW I think there might also be some misconceptions about the company based on some things I’ve read on the board.

I took a tiny placeholder position to keep it on my radar while I learn more. I’m not sure yet if I’ll keep it, sell it, or add to it.



Because of Chinese laws they run an ecommerce web based site that sells to people in Hong Kong. They give volume discounts. Most sales are done over the internet and by credit card and so they get paid very quickly. They have very little in accounts receivables. A lot of these people in Hong Kong move the stuff into China. China has laws against direct to direct sales schemes such that herbal life and nuskin uses here, thus the ecommerce site. In 2007 they paid a fine to the Chinese government but we’re allowed to persist. They have been ignored for an application of a direct to direct business license, thus the ecommerce site. As for why China I assume it’s because it’s a glamorous American product that has some prestige and perhaps lack of availability in China but I speculate. They are a couple of U.S. born who hoped great success at home but have found more success elsewhere. Is it the first time? How long might a hot trend in China last that’s another. However the threat of a Chinese crackdown remains the biggest risk.

From the latest quarterly.

We generate approximately 97% of our net sales from subsidiaries located outside North America, with sales in Hong Kong representing 92% of net sales in the latest fiscal quarter. Because of the size of our foreign operations, operating results can …Most of our Hong Kong revenue is derived from the sale of products that are delivered to members in China. After consulting with outside professionals, we believe that our Hong Kong e-commerce business does not violate any applicable laws in China even though it is used for the internet purchase of our products by buyers in China. But the government in China could, in the future, officially interpret its laws and regulations – or adopt new laws and regulations – to prohibit some or all of our e-commerce activities with China and, if our members engage in illegal activities in China, those actions could be attributed to us. In addition, other Chinese laws regarding how and when members

It appears they are quite shareholder friendly in regards to stock-based compensation I became a little glassy eyed after reading over a few quarterlies today and have to go over some of this one again.

Based on its really attractive 1ypeg I bought a small share.



Hi RHPolk - if you really want a Yikes moment, take a look at the five year chart. It’s up almost 10,000 percent.

I appreciate all the back and forth on this - good discussion and nice to have different perspectives.


3)yoy revenue numbers look good but last 3 quarters may indicate slowing??? Will the growth continue?

Yea! Playing around with my own estimates it appears that comps are shrinking. But who knows they may surprise. It seems they did suprise same quarter last year but thier earnings aren’t quite consistent. Wish I found it a bit earlier. How big can this become before the Chinese take a sharper look?..or will they? Ah the risks! Been a nice little ride so far.


Any chartists on this board care to comment where this could go? Puddinhead42?{“range”:“5y”,“allowChartStacking”:true}

Even on a 3 stage hockey stick ascent it is getting pretty dizzy. I mean 25 bagger in 2 years 50 bagger in 3 years. wow.

One thing makes me nervous……

It seems as though China is looking to close the door on ecommerce importation of VMS.

If it is registered for China importation and/or locally manufactured then it is well positioned and the competition is going to be restricted. If it is not registered and relying on back door ecommerce, the regulatory door could be about to close.


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Thats a name I see every now and again bouncing up and down like a pinball.

Can’t really get a read on it one way or another. There are many other names if you are looking for a China play that are probably better.

As a side note, NHTC hit a split adjusted high of 28,500 in 1995 for whatever that is worth