What a fad diet taketh away, the demise of that fad may restore.
Atkins is fading back into the haze of other assorted diet crazes (no doubt to reappear again in 10 or 15 years), and that's good news for the likes of Weight Watchers
For NutriSystem, this has been an amazing year. The first, last, and only time I wrote about this stock was back in early April, when I talked about obesity-related investment ideas. At that time, I closed my discussion of the company by saying, "I don't know about you, but that sounds to me like it's maybe worth at least a second look."
I should have taken my own advice. Had you bought the stock the day after that piece was published, you would have paid no more than $6.45 a share, and you'd be sitting pretty with better than a four-bagger in just half a year's time.
And it doesn't seem like the good times are about to stop rolling just yet. Before the market opened today, the company announced that it would considerably exceed its own guidance for the third quarter. Based on nearly twice as many new subscribers as originally forecast (115,000 versus 65,000), revenue will be coming in between $64 million and $65 million -- well ahead of the mean estimate of $43 million. Though the company declined to provide earnings guidance, I'd be surprised (and a bit worried) if there weren't some meaningful upside to the current average estimate of about $0.10 per share.
No doubt about it, NutriSystem is growing like gangbusters right now. And, as is often the case, investors have rewarded top-flight growth with a top-flight valuation and a pretty good-sized short position. With the valuation being what it is, the company will have to perform exceptionally well over the coming years to justify the price tag. I'm not saying it can't or won't; rather, I'm simply saying that the growth baked into the numbers is at a level that not too many companies achieve. Then again, if the company can continue to feast on disappointed do-it-yourself dieters, I don't see why it couldn't grow itself to parity with Weight Watchers, given enough time.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
