Why Shares of Nu Skin Enterprises, Inc. Jumped
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Nu Skin Enterprises were looking impressive today, gaining as much as 30% and finishing up 18% after receiving a fine in China that was not nearly as bad as feared.
So what: Back in January, Nu Skin shares lost nearly 40% in two days when an official Chinese government newspaper called the company a "pyramid scheme" and regulatory agencies announced an investigation against the beauty-products seller. Today, Nu Skin revealed that it was fined just $540,000 for selling products through individual sellers that were meant for retail, and for product claims that lacked sufficient supporting evidence. The regulatory agencies also asked Nu Skin to "enhance the education and supervision of sales representatives."
Now what: Investors had feared much greater consequences from the Chinese investigation as Nu Skin had suspended business promotional meetings and new sales-rep hiring in the wake of the investigation. Considering that the concerns in China seem essentially gone after the fine, it's surprising to see shares still trading close to 40% lower than they were just before the investigation. Nu Skin said it would look to the Chinese government for "direction on resuming normal business activities," and that it believed in "the potential of China's large and growing market." China has been a crucial growth market for Nu Skin as sales grew 248% there in its most recent quarter, making up nearly half of total sales. With an opportunity like that, shares look cheap at a P/E of just 15.
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The article Why Shares of Nu Skin Enterprises, Inc. Jumped originally appeared on Fool.com.Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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