The company was able to beat analyst estimates in the last earnings. The last few earnings have been good, and the probability of a net profit on a full year basis is very high. The stock has done great with nearly 80% appreciation from the 52 week low made in April. On a 52 week basis it has appreciated by 24%. Though there has been a significant improvement in the bottom-line, the revenues declined. This could be partly due to conscious efforts by the company to concentrate on higher margin products and rationalize cost structure. However, now it is important for the company to show improvement on this front. The low margins make it critical for the company to increase the topline so that the overall financial position remains strong. A recent report had mentioned that the online weight loss service industry is likely to grow well over the next 5 years. This is mainly due to the expected improvement in the economy, leading to more discretionary spending. Established companies like Nutrisystem are expected to benefit from the growth. The recent results of the competitors indicated that while Weight Watchers (WTW) is not doing that great, Medifast (MED) has shown good growth. This is a highly fragmented market, and companies have different approaches to tackling the weight problem. There is competition from vitamins / mineral supplements where new products are being launched all the time. Even a small company Chromadex Corporation (CDXC) has come up with a weight loss /diabetes management vitamin derivative. So the growth is not easy, and the competition makes it difficult to have huge margins. Nutrisystem has shown good promise in the last few quarters. However, the stock has also moved smartly, and it may be good to remain a bit cautious. A lot of future positives may have been factored in the price.
I think that is a fair analysis investora2z. There is proof that costs and margins are well underway toward being fixed. Now all the remains is solid proof that top line revenue is now going to turn around and grow again. There simply was not enough information in Q2 to confirm that. Hopefully Q3 will give some good indicators.
The beauty of this company is that if they can now turnaround top line sales growth, it will amount to huge improvement on the bottom line because of their cost discipline and product line rationalization, leaving good margined products being sold right now. Some companies make a big push for top line growth and end up in a mess with lower profits because of what they sacrifice to get the sales. NTRI management seems to have gotten it right: get your margins corrected, then go for the sales growth.
Up marginally since November -- before the CEO change. It will be fun to watch NTRI beat their own internals on the next earnings report. The two women spokespeople for their TV campaign look and sound great. Much better than the Terry Bradshaw era. I suspect revenues are on the mend -- finally.