Can Nautilus Get Pumped Up Again?

Health-equipment maker Nautilus Group (NLS ) continues to lose muscle, turning off most analysts. None of those tracked by Thomson First Call has a buy rating on the stock, suggesting that the downturn in sales may continue. Shares sagged from 42 a year ago to 10 in early April before perking up to 13.47 on May 7. Will Nautilus ever get back in shape? Money manager John Buckingham of Al Frank Asset Management thinks so. He started buying when it hit 10, tagging it as very undervalued -- at 7.8 times projected 2003 earnings of $1.65 a share. The company earned $2.29 a share in 2002. Buckingham believes Nautilus has "excellent long-term prospects," with its 3% dividend yield, clean balance sheet, little debt, and new products soon to be unveiled. Nautilus makes Bowflex, TreadClimber, StairMaster, and Nautilus gear. But sales slumped a year ago because of stiff competition and the recession. In 2003's first quarter, the environment worsened, says CEO Brian Cook, with the war in Iraq and a sharp drop in consumer confidence. Still, Buckingham expects investors to rediscover Nautilus as the hot growth stock it was, once consumer confidence picks up. He sees Nautilus hitting 20 in 12 months -- then climbing to 27 in two years.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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