NLS NAUTILUS, INC.
Sector financial performance:
This company, primarily a designer, developer, and marketer of cardio and strength fitness products and accessories, has been grouped into fitness equipment sector in personal care industry.
It seems that demand, from consumers by direct selling channels, for cardio products has been strong as new cardio products were launched in 2013 by some of typical company in this sector, while the total demand has been generally declining in the past two years. However, offset by quickly increasing demand for strength products, the organic sales in this sector had been basically kept stable.
Declining demand, especially from its direct selling of cardio products, seems to put huge pressure on the price as indicated by the increasing discounting activities for those products.
We have seen a slight declining in typical companies ‘gross margin (about 50% in 2017). However, the spending in SG&A has been leveraged due to increased sales as a result of acquisition. Therefore, the typical operating margin has been flat at about 11% since 2014.
The typical average stock price/cash flow ratio is about 15.
It seems that the growth in demand, brought by cardio products launched in 2013, has slowed down in the past two years while the demand has kept strong. The decrease in cardio products seems to have been offset by fast increase in its strength products in past two years.
The fiscal 2017 compared with the 2016
Direct sales (including TV, internets) decreased 2.5% primarily due to decrease in cardio products offset by increase of 40% in strength products sales.
Retail sales increased 3.3%.
The fiscal 2016 compared with 2015
Direct sales (including TV, internets) decreased 0.2% primarily due to decrease in cardio products offset by increase of 3% in strength products sales.
Organic retail sales increased.
Fiscal 2015 compared with 2014
Direct sales (including TV, internet) increased 29% primarily due to increase of 31% in cardio products.
Retail sales increased 14% due to increase in cardio products.
Its gross margin has decreased by about 130 basis points since 2014 to about 50% of 2017 due to more discounting and increased product costs. However, its operating margin thus was kept flat at about 11% in 2017 due to lower SG&A as percentage of sales (about 35% at 2017) as a result of acquisition.
This stock currently has a stock price/cash flow ratio of 15. We think that its stock is being relatively undervalued compared with its peers.
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