HerbalifeScore one for Herbalife (NYSE: HLF). Shares soared today after reporting better-than-expected earnings.

The near 20% move should be painful for Bill Ackman and his billion-dollar short.

The notorious hedge fund manager made that highly publicized bet a year and a half ago, and has used nearly every trick in the book to beat down shares.

It almost worked.

Ackman’s calls for a government investigation have yet to yield his desired result of pushing Herbalife shares to zero.

Herbalife uses a direct marketing model, whereby sales reps not only distribute product, but also recruit other sales people. Debating the merits of the strategy is one thing, but aggressively attacking a publicly traded company is another.

Look, whether you like the idea of its business model or not, Herbalife is legit; earnings confirm it. The company can, indeed, sell its product—and profitably.

Those profits are growing quickly, too… or at least they were before Ackman’s efforts.

The high-profile attacks did tremendous damage to the company. As the short story took hold, Herbalife faced a huge hurdle in maintaining and recruiting new sales people.

The model held because of the product. Isn’t that what the American business model is all about anyway?

Herbalife has spent millions on legal fees and marketing defending itself. With the latest earnings report, those efforts appear to be paying off.

The company beat earnings estimates by a wide margin, coming in at $1.24 per share on an adjusted basis, compared to the average estimate of $1.11 per share. It also raised the profit guidance range for the year by a full $.20 per share.

No wonder the stock rallied fiercely.

The next chapter in the story: Herbalife’s exoneration by the various governmental entities investigating Ackman’s claims.

When that happens, valuation will truly return to the forefront—and with it, a jump in share price commensurate with the expectations of strong growth it enjoyed before Ackman’s crusade.

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