Usana’s Contradictions

Someone on a message board for discussing Usana Health Sciences (NASDAQ:USNA) made some interesting comments about the company. Quite simply, management consistently makes statements that contradict earlier statements. Here’s what she observed:

I never have any idea what the market will do in the short term.

I usually look at fundamentals and this company didn’t have any tangible assets to back up the share price. Now they do have more plant and equipment but they borrowed the money to pay for them.

I think I mentioned in the past I couldn’t invest one way or the other in this stock because it is manipulated. I think Usana doesn’t have a lot of room to buy back for several reasons (negative shareholder’s equity, pressure from the bank whose only collateral is the stock in the subsidiaries, the effect of interest expense on eps, etc). But the company always does surprising things.

For example, they constantly contradict one another, on subsequent conf. calls or even on the same one and no one points it out:

1. Dave: Make extra income with Usana. Gil: They only want the vitamins, they’re volunteers

2. FTC ruling is good, FTC ruling will hurt us.

3. We needed the new facilities to grow. Our margins are going to be tighter because of the new facilities.

4. Our research is great. We came up with a different package for vitamins.

5. We’re suing for market manipulation. We don’t want to disclose our own positions.

6. 3rd qtr is slow because everyone vacations in August. 4th qtr is slow because everyone worked so hard they are fatigued.

So……there are far better companies to own long and probably also better companies to short at this point.


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