Shares in eDiets (NASD:DIET) are down 43% from their 52-week high of $8.60 and currently trade at $4.85. Results for Q1 06 did not help.
Revenue compared to the prior year's quarter rose slightly from $13.0 million to $13.8 million. But the operating loss also grew from $3.5 to $3.6 million.
The company had experienced reasonable growth up until recently. Revenue rose from $38.3 million for 2003 to $53.7 million in 2005. In 2005, eDiet had an operating profit of $1.2 million. But, during 2005, revenue peaked in Q2 (June) at $15.1 million and then dropped in the September quarter to $13.5 million and to $12.1 million in the December quarter. So, the current quarter is an uptick. But the operating loss is not. In each of the last three quarters of 2005, the company showed operating profits.
In the last few days, the news has gotten worse. The company agreed to buy Nutrio.com for $8.5 million. The company also did a private placement with Prides Capital for 1.7 million shares plus some warrants and under the purchase agreement that number of shares could rise. Prides will get representation on the company board.
That's a lot of dilution.
eDiet competes with tons of businesses like WeightWatchers online (NYSE:WTW), WebMD (NASDAQ:WBMD), and DietWatch, to name a few. It would appear that all this competition has slowed eDiet's growth. And, they have not disclosed any meaningful plan to get back on track. With $8.8 million in cash on the balance sheet, the company does not have much of a war chest. Under the circumstances, investors should not look to see the company's share price rise much any time soon.
DIET 1-yr chart:
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at firstname.lastname@example.org.