Accumulate This Asset-Light Dividend Payer On Weakness For A Healthier Portfolio

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Investment Thesis Nutrisystem (NTRI) is basically a service provider that sells weight-loss programs, multi-day kits and single items. The company outsources the production and logistics of delivery of the meal plans it sells. This way, Nutrisystem is able to remain a debt-free, asset-light company with excellent cash generation capabilities.
Marketing expenses have the lion's share in Nutrisystem's operating costs and the success of the company relies heavily on marketing activities. The company delivered very satisfying results over the past few years. However, management ran into difficulties with the marketing campaign while facing cost pressures. 2018 is expected to be a year with no revenue growth and weaker profit margins.
Our investment thesis relies on our expectation that revenue growth will be resumed in 2019 on the back of new product launches (reactivation effects of South Beach Diet products and a new vitamin line). Profit margins should also recover as growth helps the company realize some marketing efficiencies. We view possible stock price weakness over the second half of 2018 as an entry opportunity for this debt - free, cash generating dividend payer.
Financial Overview Let us take a quick look at Nutrisystem's long term financials:


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Nutrisystem was able to grow its revenues from $404M to $697M over the three-year period from 2014 to 2017 with a satisfying CAGR of 20%. Over the same period, gross profit... Read more

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