NTRI Nutrisystem, Inc

Sector financial performance:

This company, primarily a provider of weight management products and service selling food to its program participants by online and telephone, has been grouped into weight-loss sector in personal care industry.
It seems that demand for weight loss related service and products has been solid and growing in the past three years as indicated by the quick increase in weight loss programs participants and their spending, which contribute to fast growth in revenue of typical companies in this sector (20% and 10% for 2017 and 2016 respectively). It seems the US market has contributed most of demand and growth in the past two years.
The generally improved operating margin of companies (increased from about 14% to 17% in 2017) in this sector can be explained by leveraging of expenses as a result of sales increase.  The improved operating margin has come from improvement both in gross margin (from 51% to 52% of 2017) and in SG&A as percentage of sales (from 38% to 36% of 2017).
The typical average stock price/cash flow ratio is about 28 ranging from 17 to 40.

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Company performance:

It seems that demand for products of this company has been growing very quickly in the past several years as indicated its annual sales growth rate of about 20%. The fast growth in sales may also be a result of its successful marketing and sales operating as reflected by the same quick growth in number of new participants of its program.
The fiscal 2017 compared with the same period of 2016
Net revenue increased about 28% attributable primarily to increase of about 20% brought by new customers.
The fiscal 2016 compared with 2015
Net revenue increased about 18% attributable primarily to increase of about 13% brought by new customers.
Fiscal 2015 compared with fiscal 2014
Net revenue increased about 15% attributable primarily to increase brought by new customers and increase in selling price.
Its gross margin has gone up from 49% to about 52% in 2017 attributable to increased price and decreased food costs. with decreased SG&A as percentage of sales (around 39%) due to leveraging of increased sales, its operating margin went up to about 12% in 2017.

Stock performance

This stock currently has a stock price/cash flow ratio of 17. We think that its stock is being relatively undervalued considering that the recent decline in quarter revenue cannot explain completely the as low multiple as 17.

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