As I write this, Mannatech (MTEX) is nearly a four bagger since when I first spoke about it, back in November 2012. Granted, the stock was almost for free back in November, but it's still an incredible move in little more than 9 months.
But this was supposed to be an article updating on Natural Alternatives International (NAII). So why talk about Mannatech? It happens that Mannatech is NAII's 2nd largest customer, and NAII's revenues are very concentrated:
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So Mannatech represented 17% of NAII's revenues in the last quarter. And, back then, Mannatech was shrinking so NAII's revenues from it were also shrinking. Indeed, NAII even singled out Mannatech as one of the customers having a negative impact, the other being privately held NSA International:
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This relevance forms the basis of the present update. Mannatech is not going up just because of Bernanke's actions and general stock market happiness. As we saw Mannatech - a multi-level marketer - was having trouble until recently. But due to the launch of new products and a renewed recruiting drive, Mannatech has now possibly turned the corner.
At the very least, Mannatech is no longer shrinking. It's now growing and, due to its rapid recruiting drive, it's likely to grow even faster in the near future. This much can be gathered from its latest earnings report, as follows (Source: MTEX Q2 2013 earnings report):
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Not only that, but distributor recruiting accelerated substantially, reversing the shrinking trend there as well and promising further growth in the quarters to follow:
Recruiting increased 31.2% in the second quarter 2013 as compared to the second quarter of 2012. The number of new independent associates and members for the second quarter of 2013 was approximately 36,200, as compared to 27,600 in 2012. The total number of independent associates and members based on a 12-month trailing period was approximately 240,000 as of June 30, 2013, as compared to 230,000 as of June 30, 2012.
Relevance for NAII
As we saw, Mannatech is NAII's 2nd largest customer. Up until the March quarter, MTEX was contributing negatively for NAII's revenues. Now, given the turnaround at MTEX we have some likelihood that soon it will be contributing positively for NAII.
We don't have data on NSA International, the largest customer, so this might not be enough to turn around fortunes at NAII instantly. But it helps, and reinforces the trend which I covered in my first article, regarding the FDA being stricter with dietary supplement manufacturers and that benefiting NAII.
This turnaround at MTEX thus constitutes a further positive catalyst for NAII, also aided by MTEX's significant recent stock market performance, which might bleed somewhat into NAII as investors and speculators link the two.
Conclusion
MTEX, which has had a recent blistering performance in the stock market, looks set to turn its fortunes around at least temporarily. MTEX is also NAII's second largest customer. So with MTEX seeing more sales volume, NAII might also benefit from higher revenues, whereas until recently MTEX was shrinking its orders to NAII.
This constitutes a further positive catalyst for NAII shares, to add to the previously described catalyst represented by the FDA's more strict and frequent inspections of dietary supplement manufacturers.
Disclosure: I am long NAII. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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