Boston, MA 03/25/2014 (wallstreetpr) -Shares of the personal care products company USANA Health Sciences, Inc. (NYSE:USNA) managed to jump more than 9 percent during trading Monday due to the positive news from peer Nu Skin Enterprises (NYSE:NUS).
The shares of the company closed at $72.97, up 9.4 percent on solid volume.
The company manufactures and sells personal care and nutritional products. Its business spans 15 market globally and reports in two geographical regions namely Asia Pacific which captures China and other markets and North America.
Like Nu Skin, the company runs tiered marketing system, which means it distributes and sales directly to consumers. This kind of marketing systems has attracted increased scrutiny, more so in the U.S. and China where the government launched investigations against Nu Skins. The company was said to have made misleading product claims and breached tier marketing permit in offering some products through direct sales.
Shares fell on investigations
Following the investigation of Nu Skin and the growing scrutiny of multi-level marketing companies, shares of USANA Health Sciences, Inc. (NYSE:USNA) and peers such as Herbalife (NYSE:HLF) fell significantly in the past several weeks as investors got soaked in worries about the future of the industry. However, when it turned out that the Chinese government imposed a fine of only $540,000 against Nu Skin and failed to halt multi-level marketing as was feared, excitement returned in the stocks.
It should be remembered that Herbalife and USANA faced big scrutiny in the U.S. with some hedge fund managers casting big doubt about the future of such businesses.
Pyramid scheme
Being viewed is as pyramid schemes hurts stock of multi-level companies like USANA Health Sciences, Inc. (NYSE:USNA). A lot of negative things have been associated with pyramid schemes that authorities across the world are always on high alert and stern eye on tier marketing companies. But the latest development in China where investigations into the business practice of a multi-level company ended with a much smaller fine than expected comes as a big morale boost for managers of direct-sales companies like USANA Health Sciences, Inc. (NYSE:USNA).
