GNC's operations are under pressure from e-commerce trends but the company remains substantially profitable and cash generative. Management's current strategy is to re-franchise more of the company's stores.
After the shares were crushed for a second consecutive report last quarter, the Board announced that they would "consider strategic alteernatives.
Possible options run from a sale of the company through a recapitalization to a more aggressive capital return strategy, to an acquisition of VSI ( Vitamin Shoppe ). last week, DealReporter indicated that there were Asian buyers expressing interest in the company.
Absent a favorable transaction, GNC shares are cheap on tehir own. LTM FCF is nearly $380 million, representing a FCF yield of about 20% of the current $1.85 billion equity market cap. In my view, taht provides plenty of support for an investor at current levels should no deal develop as management already is rapidly buying in shares with both FCF and cash generated from re-franchinsing. Buybacks at these levels seemingly anhance already attractive valuation.
Some sell-side analystts have estimated taht GNC could be taken out in the $32-$35 range. I think the range is more likely to be $35-$38. GNC traded in the mid-40s as recently as 2014.