Lose Weight and Make Money

By Michael Caligiuri - December 28, 2011 | Tickers: NTRI, WTW | 0 Comments

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It's that time again when everyone makes a New Year's resolution.  Many people will likely aim to lose weight, and others will try to boost lackluster portfolio returns.  Whether you need to shed a few pounds or make more money (or both), Weight Watchers International (NYSE: WTW) is the right solution for you.

What's up With the Stock?

I woke up this morning and decided to make a simple stock screener searching for winners.  The criteria I entered for the screener were the following:

• Price Performance (This Yr) > 20%
• Gross Profit Margin (TTM) > 20%
• Revenue Growth (TTM vs. Prior TTM) > 20%
• Market Capitalization > $1 billion

The point of this screener was to find fast growing, profitable, relatively large, and high performing stocks.  The one stock that I will highlight from this screener is WTW.  The specific financial metrics for WTW are in the table below:

Weight Watchers International (WTW)

Data from Yahoo! Finance and Adage.com

What’s the Business?

Weight Watchers International provides a weight management service that help consumers (for a fee!) manage their weight with diet plans, exercises, and nutritional services.  The two premier services for WTW consumers are the PointsPlus program and the ProPoints Program. 

PointsPlus and ProPoints

The PointsPlus program is scientifically proven to help people lose weight.  Customers are given a specific budget of points to spend on food.  Specific foods are assigned certain point values based on their fat, carbohydrates, dietary fiber content, protein, etc.  In general, a healthier food is assigned a lower point value than a less healthy food.  Another way to think about this program is in terms of money.  Pretend you go to the grocery store with a $100 budget and all the healthy foods are very inexpensive, but the unhealthy foods are very expensive.  The point of the program is to incentivize customers to eat healthier food and stay away from unhealthy food.

ProPoints is an enhanced version of the PointsPlus program.  Since the invention of PointsPlus in 1995, a considerable amount of research has been done pertaining to weight loss.  The findings of this new research have been factored into the new ProPoints program.  Judith Keeling from Mail Online explains it like this:

“Under the old system a ­chocolate bar and a steak might have had the same points value because they had the same amount of calories, under the new ProPoints system your steak would have fewer points because your body uses up so much more energy processing it.” For the complete article, click here.

The Future

Unfortunately, the future is bright for Weight Watchers.  The percentage and number of obese people is expected to continue growing.  In addition to more people gaining weight, there is ever more pressure from the fashion industry to look thin.  According to Marketdata Enterprises:

“The weight management industry had revenue of approximately $60 billion in 2009 in the United States alone. The number of overweight and obese people has steadily increased around the world over the past 20 years and is estimated to reach approximately 3.0 billion by 2015, primarily driven by changing eating patterns and increasingly sedentary lifestyles” (2010 WTW Annual Report). 

As a market leader in the growing weight loss industry, WTW seems poised to continue its success. WTW’s two main competitors are Jenny Craig and Nutrisystem (NASDAQ: NTRI).  Compared to these companies, WTW is dominating.

Conclusion

Weight Watchers is the market leader in an industry that is expected to expand greatly in the near future.  With high revenue growth, high past price performance, and impressive profit margins, I expect Weight Watchers to reward investors handsomely over the long run.

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