This company, primarily a provider of weight management products and service earning revenue from subscription of programs and related online digital products, 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.
It seems that demand for service and products of this company has been growing since second half of 2015 as indicated by increased paid weeks first and then subscribers. The upward trend started from US market and UK and Europe market followed.
The fiscal 2017 compared with the same period of 2016
Organic sales increased about 12% attributable primarily to increase in paid weeks (18% in US market and 20% in European market) and products sales (10% in US market).
The fiscal 2016 compared with 2015
Organic sales increased about 1.4% attributable primarily to increase in paid weeks (9%) and products sales (6%) in US market offset by decrease in paid weeks and products sales in UK and Europe.
Fiscal 2015 compared with fiscal 2014
Organic sales decreased about 16% attributable primarily to decrease in paid weeks (21%) and products sales (24%) in US market and decrease in paid weeks (14% and 8%) and products sales(17% and 9%) in UK and Europe respectively.
Its gross margin has gone up back about 53% in 2017 attributable to leveraging of expenses as a result of sales increases and sales shifting to higher margins products. With lower decreased SG&A as percentage of sales (around 32%), its operating margin went up to about 22% in 2017.
Stock performance
This stock currently has a stock price/cash flow ratio of 40. We think that its stock is being relatively slightly undervalued.
