3 Stocks That Stand To Benefit From One New Year's Resolution

Josh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

At the beginning of every year, after Americans make their New Year’s resolutions, health club membership sales spike, as do sales of other health and wellness products. This year is no different. Here are a few notable companies that stand to benefit from the boom in business.

Weight Watchers (NYSE: WTW) is the world's leading provider of weight management services, operating globally through a network of company-owned and franchise operations. Weight Watchers holds over 45,000 meetings each week where members receive group support and learn about healthy eating patterns, behavior modification, and physical activity. Weight Watchers offers a wide range of products, publications, and programs for those interested in weight loss and weight control.

The stock has struggled over the past year, but has seen the light since the end of December. It seems like the earnings miss that plagued the stock for the first quarter of 2012 has been corrected, as the company has reported earnings beats the past two quarters. For the third quarter the results were spectacular, as the company reported earnings of 13 cents above analyst estimates. The stock trades at a forward P/E ratio of 12.

In other news, obesity continues to be a problem in the US, playing right into WTW’s products. According to the Centers for Disease Control and Prevention, more than one-third of U.S. adults (35.7%) are obese. Obesity-related conditions include heart disease, stroke, type 2 diabetes, and certain types of cancer, some of the leading causes of preventable death. In 2008, medical costs associated with obesity were estimated at $147 billion; the medical costs for people who are obese were $1,429 higher than those of normal weight.

United Natural Foods (NASDAQ: UNFI) carries and distributes more than 65,000 products to more than 27,000 customer locations throughout the United States and Canada. The company serves a wide variety of retail formats, including conventional supermarket chains, natural product superstores, independent retail operators, and the food service channel.

The company is the largest distributor of natural, organic, and specialty products in the US and Canada, with the company’s network creating significant advantages over small or regional distributors through broader product selection, additional service offerings, operational excellence, and scale. The highly fragmented competitive environment creates additional opportunity for the company in combination with the rapidly growing natural, organic, and specialty products space. The company also happens to be the primary natural and organic supplier to Whole Foods Market, cementing its status as a leader in distribution.

The stock trades at a forward P/E multiple of 24, suggesting significant growth in revenue and earnings for the company. The company has delivered on that front, backing up the premium multiple investors have placed on the stock. EPS is expected to jump in FY13 while revenues are expected to increase by 15%. The growth is expected to roll into the following year, with analysts expecting EPS growth of 13% on revenue growth of 10%.

United Natural Foods obviously carries a large number of products, but one interesting group of products that it is expected to begin carrying soon is Pulse Beverage’s brand of functional beverages. Pulse’s line of functional beverages address key nutritional needs of people of all ages but specifically for people 30+ who want to feel 30+ for the rest of their lives. Pulse beverages contain functional ingredients, including certain vitamins and anti-oxidants such as Vitamins C, D, E, B6, and B12, Folic Acid, Calcium, Magnesium, lycopene, selenium, soluble fiber, green tea catechins and soy isoflavones. These beverages are expected to debut shortly and distributors are eagerly awaiting the initial launch.

Although currently smaller operations, Pulse has built a nationwide distribution system with 83 distributors servicing 43 US states, Canada, Panama, Bermuda and Mexico. Once this “critical mass” of distributors was established and operating well, the company could then approach and secure listings for Cabana, Pulse’s natural lemonade beverage, with large grocery and convenience store chains resulting in approved listings to date totaling over 6,500 outlets. While the company is starting to deliver Cabana to some of these outlets, the company is ramping up production to deliver Cabana to all of these outlets starting in Q1 2013.

Whole Foods Market (NASDAQ: WFM) is the leading retailer of natural and organic foods and America's first national “Certified Organic” grocer. In fiscal year 2012, the company had sales of approximately $12 billion and currently has over 340 stores in the United States, Canada, and the United Kingdom.

With the long record of growth for the company, as in the case with United National Foods, the stock trades at a premium multiple of 30x FY13 earnings. Analysts back that multiple up with EPS growth estimates of 15% in FY13, followed by an acceleration of 18% in FY14. Revenues are expected to jump by 12% and 15% over the next two years.

The rise in the share price has been driven by the company’s financial results, and the company has shared its financial successes with shareholders by recently announcing a $2 special dividend and a $300 million increase in its stock buyback authorization.


jdhutche has no position in any stocks mentioned. The Motley Fool recommends Whole Foods Market. The Motley Fool owns shares of Whole Foods Market. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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