As indicated by typical sales data, the demand for service and product of companies in this sector has been strong and growing in US market in the past several years as a result of increasing spending in marketing and consumers’ education of companies above the basic driver from obese and aging population.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

1. The demand for weight management service and products has been solid and growing fast in the past two years.

2. The growth in demand has been seen from different channels and business modes including the increase in weight loss programs participants, their spending on programs and products, sales base of direct selling channels, and increasing price of service and products.

3. The strong demand has also been confirmed by the fact that the performance of direct sales of weight management products has been better than that of other products.

4. It seems that demand has been very strong in US market and grown faster than in other regions.

Causes behind the trend

1. The obesity and the aging of population and public health care costs have always been the major drivers behind demand for weight loss and management services and products.

2. In direct selling business mode of weight management products, the real demand for products itself seems to be playing more positive roles in influencing sales than it is in the direct selling of products and services.

3. The increased spending of companies on education and marketing may be the direct reason of fast growth of sales in the past two years.

Industry Future

1. We believe that the upward trend in this sector will continue as the favourable factors behind solid demand do.

General Financial Performance of Companies In the Sector

It seems that the direct selling market for weight loss related products has been growing as indicated by the quick increase in sales. While the performances, in terms of sales volume, are different among different companies and regions, we have seen the solid demand for weight loss related products and solid sales base.  The estimate of favourable market environment has also been confirmed by the generally increasing selling price in the past three years.

The generally improved operating margin of companies ( increased from about 10% to 13% in 2017) in this sector also help prove that the increase in sales volumes may be a result of natural increase in demand both from consumers for product and from sales for opportunities to earn money. The improved operating margin has come from improvement both in gross margin (from 77% to 78% of 2017) and in SG&A as percentage of sales (from 66% to 65% of 2017).

The typical average stock price/cash flow ratio is about 40 ranging from 34 to 46.

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