Herbalife (HLF)

Health and wellness products company Herbalife (NYSE:HLF) announced better-than-expected revenue in Q3 CY2025, with sales up 2.7% year on year to $1.27 billion. The company expects next quarter’s revenue to be around $1.25 billion, close to analysts’ estimates. Its non-GAAP profit of $0.50 per share was 8.4% above analysts’ consensus estimates.

Company Overview

With the first products sold out of the trunk of the founder’s car, Herbalife (NYSE:HLF) today offers a portfolio of shakes, supplements, personal care products, and weight management programs to help customers reach their nutritional and fitness goals.

While personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering. Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.

Competitors offering health and wellness supplements and products include Usana Health Sciences (NYSE:USNA), Bellring Brands (NYSE:BRBR), and The Simply Good Foods Company (NASDAQ:SMPL).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.

With $4.96 billion in revenue over the past 12 months, Herbalife carries some recognizable products but is a mid-sized consumer staples company. Its size could bring disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale.

As you can see below, Herbalife struggled to generate demand over the last three years. Its sales dropped by 2.4% annually as consumers bought less of its products.

This quarter, Herbalife reported modest year-on-year revenue growth of 2.7% but beat Wall Street’s estimates by 0.5%. Company management is currently guiding for a 3.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 3.8% over the next 12 months. While this projection implies its newer products will fuel better top-line performance, it is still below the sector average.

When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.

The demand for Herbalife’s products has been stable over the last eight quarters but fell behind the broader sector. On average, the company has posted feeble year-on-year organic revenue growth of 1.4%.

In the latest quarter, Herbalife’s organic sales rose by 2.7% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.

Herbalife has great unit economics for a consumer staples company, giving it ample room to invest in areas such as marketing and talent to grow its brand. As you can see below, it averaged an excellent 49.2% gross margin over the last two years. That means for every $100 in revenue, only $50.76 went towards paying for raw materials, production of goods, transportation, and distribution.

Herbalife produced a 77.7% gross profit margin in Q3, marking a 32 percentage point increase from 45.6% in the same quarter last year. Herbalife’s full-year margin has also been trending up over the past 12 months, increasing by 8.8 percentage points. If this move continues, it could suggest a less competitive environment where the company has better pricing power and leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.

Herbalife has done a decent job managing its cost base over the last two years. The company has produced an average operating margin of 8.3%, higher than the broader consumer staples sector.

Looking at the trend in its profitability, Herbalife’s operating margin rose by 3.1 percentage points over the last year, showing its efficiency has improved.

In Q3, Herbalife generated an operating margin profit margin of 9.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

In Q3, Herbalife reported adjusted EPS of $0.50, down from $0.57 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 8.4%. Over the next 12 months, Wall Street expects Herbalife’s full-year EPS of $2.04 to grow 17.4%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Herbalife has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4%, subpar for a consumer staples business.

Herbalife’s free cash flow clocked in at $118 million in Q3, equivalent to a 9.3% margin. This result was good as its margin was 3.4 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Herbalife hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 37.2%, splendid for a consumer staples business.

Herbalife reported $305.5 million of cash and $2.02 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $672.7 million of EBITDA over the last 12 months, we view Herbalife’s 2.5× net-debt-to-EBITDA ratio as safe. We also see its $108.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Herbalife blew past analysts’ EBITDA expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed. Overall, this print had some key positives. The stock traded up 6.9% to $8.87 immediately after reporting.

Updated: December 4, 2025 at 9:49 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Herbalife, you should also grasp the company’s longer-term business quality and valuation.

Herbalife isn’t a terrible business, but it isn’t one of our picks. To begin with, its revenue has declined over the last three years. And while its stellar ROIC suggests it has been a well-run company historically, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets. On top of that, its shrinking sales volumes suggest it’ll need to change its strategy to succeed.

Herbalife’s P/E ratio based on the next 12 months is 4.7x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $9.67 on the company (compared to the current share price of $12.09).