Juan Mendoza, a director at Herbalife (HLF), recently bought 10,921 shares. The buy increased his stake by 40 percent, and came to a total cost of $99,818.
The buy came about three weeks after the company CEO bought 61,725 shares, paying $498,300 to do so. Over the last 12 months, three other directors have been buyers of shares in the six-figure range. One EVP sold about $100,000 of shares over the same time.
Overall, Herbalife insiders own 3.1 percent of shares.
The nutritional supplement company has seen shares get cut in half over the last year. While revenues are up 3 percent, earnings are down 50 percent. Rising costs are eating into profitability.
With the recent drop, shares trade at 4 times forward earnings, and at less than one-fifth of their price to sales ratio.
Action to take: While shares look inexpensive now, the company’s drop in earnings and current downtrend in shares isn’t a sign to buy yet, even if insiders are.
Interest investors should wait for shares to break their downtrend before investing.
For traders, shares are in a downtrend. That means a put option trade could see the best returns.
The May 2024 $7.50 puts, last trading for about $0.45 could see mid-double-digit returns in the coming weeks on a further continuation of the downtrend.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.