Year-to-date, shares of nutrition and weight-loss company Herbalife (NYSE:HLF) are down more than 50%. The multi-level marketer has been hit by a steady stream of bad news; mostly recently, a poor earnings report sent Herbalife shares plunging.

With Herbalife trading at its lowest level in nearly two years, is it time to buy the stock?

Dirt cheap
The most compelling argument for Herbalife ownership continues to come from the company's bargain price: At current levels, Herbalife is trading with a price-to-earnings ratio near 11, making it far cheaper than the broader market. On a forward basis, it's trading with an almost unbelievable single-digit P/E of around six.

It continues to be a highly shorted stock, with more than 30% of its public float sold short. This may not be relevant to its underlying business, but that high short interest could fuel rally if short sellers are forced to cover their positions. Management expects to generate nearly $500 million of free cash flow next year, almost a record high, some of which it may spend on additional share repurchases.

Above all, Herbalife continues to be a favorite of many well-regarded investors, including, most notably, activist hedge fund manager Carl Icahn, who indirectly controls 5 out of 13 seats on the company's board.

Regulatory threats remain; the business is deteriorating
But the same was true for Herbalife when I last looked at the stock in August. Back then, Herbalife was dirt cheap -- and it's only gotten cheaper. Its low P/E ratio is indisputable, but its forward P/E is of dubious value, as the company has been forced to cut its guidance.

Although Herbalife's management has said it believes it will ultimately be exonerated, regulatory risk remains an ever-present threat. A Federal Trade Commission investigation is ongoing, and there's been no hint of an outcome. It may be unlikely, but the FTC could ultimately find -- as hedge fund manager Bill Ackman has alleged -- that the company is running a pyramid scheme and is in violation of the law. Such an outcome could entail a total loss of principal for Herbalife, reminiscent of other ill-fated multi-level marketers such as Fortune Hi-Tech Marketing.

Less speculative are Herbalife's financials, which are undeniably deteriorating. Herbalife's rapid growth has stalled, and the company is even experiencing a contraction in key markets like North America. In July, it expected to finish the year with volume points (a measure of Herbalife sales) up 6%-8%; now, it expects growth of only 2.7%-3.5%.

Investors may wish to stay away
In August, I suggested investors would do well to stay away from Herbalife, and the company's most recent quarter has done nothing to change that. Overall, this year has been nothing short of a trainwreck for Herbalife shareholders, as the stock has underperformed the S&P 500 by over 60%.

Herbalife is company with a controversial business model under siege by one of the most aggressive (and successful) activist hedge fund managers. Over the last two years, Herbalife bulls have been able to point to its robust underlying business -- but now even that appears to be deteriorating.

Herbalife is undeniably cheap, but it's cheap for a reason. Admittedly, if its business turns around, or if the FTC drops its investigation, shares are likely to surge to the upside. But if its business continues to deteriorate, or if the FTC sides with Ackman, more downside seems likely. Ultimately, the reward does not seem to justify the risk.

Sam Mattera owns put options on Herbalife. The Motley Fool has the following options: long January 2016 $57 calls on Herbalife. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.