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Vitamin Shoppe, Inc.

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Vitamin Shoppe, Inc. (VSI - Free Report) shares have rocketed 41% in the past 6 months as this retailer of vitamin and feel good healthcare products gained from improved consumer confidence. On May 8, the company reported first-quarter earnings per share that beat the Zacks Consensus Estimate while climbing 30% from last year.

The stock was elevated to a Zacks #1 Rank (Strong Buy) on May 4 and has moved up 18.4% since.

Vitamin Shoppe Routinely Beats Quarterly Expectations

VSI has an excellent history of topping quarterly Zacks Consensus Estimates. The past four quarters have averaged a surprise of more than 13%. Revenues have also beaten the Zacks Consensus Estimate in the last four quarters with positive surprises in a range between 0.3% and 3.49%.

In the first quarter, earnings per share of 61 cents beat the Zacks Consensus Estimate by 7%. Revenues increased 14.4% to $248.1 million, topping the Zacks Consensus Estimate by 3.49%.

Vitamin Shoppe benefited from same-store sales growth of 9.6%, new store openings and 15% growth in Internet sales. The company was able to leverage space and supply chain costs, whereby relatively modest gains on the top line were magnified on the bottom line.

The company foresees same store revenue growth of about 5% or so, supported by the opening of 52 new retail outlets in the current year.

Earnings Estimates on the Upswing

The Zacks Consensus Estimate for 2012 has moved up 4.8% to $1.95 over the past week as all 14 estimates were revised upward. This represents an estimated growth of about 17.5%.

The Zacks Consensus Estimate for 2013 shifted higher about 5% in that timeframe to $2.31, which suggests the potential for year-over-year EPS growth of 18.2%.

Stretched Valuation

The forward PE multiple of 27.6x is more than twice the peer group average of 12x. Similarly, on a price-to-book basis, Vitamin Shoppe currently trades at 4.16x, compared with just 1.14x for its peer group average. However, the company has a 1-year ROE of 15.1% versus the peer group average of 9.7%, implying efficient usage of capital.

Chart: Solid Technicals

The burgeoning momentum for Vitamin Shoppe is well encapsulated in its chart. While the stock has somewhat aimlessly hovered close to its 50-day and 200-day moving averages for the most part of 2011-12, it managed to break free in late April. Expectations for strong earnings have catalyzed the somewhat early bullish trend.

With respect to performance, Vitamin Shoppe is trading just 3% short of its 52-week high. It has outperformed the S&P 500 over the past year and has generated a year-to-date return of 34.85% versus 8.44% for the benchmark.

About the Company

North Bergen, New Jersey-based Vitamin Shoppe, Inc sells vitamins, herbs, homeopathic drugs, minerals, supplements and other products. The company uses retail, Internet and mail order catalogues as its sales channels. As of January 28, 2012, Vitamin Shoppe had 533 stores across 40 states. The company doubled its sales between 2005 and 2011 to about $856.6 million. With a market capitalization of $1.57 billion, the company competes in niches with GNC Holdings Inc. (GNC) and a host of other retailers.

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