TRADE INSTRUCTIONS
Date: November 29, 2016
Name: USANA Health Sciences
Symbol: USNA
Type: Open
Limit: Buy below $66

TRADE TARGETS
Holding Period: 3 months
Target Return: 12.1%
Annualized Return: 48.4%
Target Price: $74
Stop Loss Level: $54

COMPANY DESCRIPTION
USANA Health Sciences develops and makes science-based nutritional and personal care products. It operates as a direct selling company in two primary geographic regions: Americas and Europe, and Asia Pacific, which includes three sub-regions: Southeast Asia Pacific, Greater China and North Asia. Link to company website.

TRADE RATIONALE
The U.S. GDP growth rate of +3.2% released this morning provides further evidence that we are now in a growth market, so it’s time to add a good old-fashioned growth stock to our portfolio and USANA fits the bill. In fact, this is the type of small-cap growth stock that mutual fund legend Peter Lynch would have loved given its PEG (Price/Earnings/Growth) Ratio of 0.56, meaning it has been growing earnings for the past five years at nearly twice the rate that the market is currently valuing them.

USANA also ranks 33^rd among all 6,000+ stocks evaluated by our Rapids Profits Matrix for its healthy combination of a high Earnings Yield (EBIT divided by enterprise value including long term debt) and high Return on Total Capital (EBIT divided by net working capital plus net fixed assets). Combined with its low PEG Ratio, these metrics indicate that USANA is fundamentally undervalued relative to the overall stock market.

Another unusual aspect of USANA is that nearly all of its outstanding stock is held by institutional and mutual fund investors, so there isn’t much stock trading in the open market. That means its price movements in either direction tend to be exaggerated by its relatively small trading volume. For that reason it’s possible we may see its price spike upward in the days to come once the program trading algorithms that follow USANA adjust for its recent stock split (see note below).

NOTE: USNA just split 2:1 last week, so be careful if you rely heavily on technical data for determining entry and exit points. For example, as of this morning Yahoo Finance was showing the 50DMA near $130 and an upper Bollinger Band at $161 even though the stock is now priced closer to $64.