Today I will look at five stocks, each with ties to the highly profitable weight-loss industry. My discussion will take us through the financials of these five companies. As we will see, some of these companies hold great promise for dieters and those suffering from type 2 diabetes. Some of these companies could also be good investment candidates. The five companies I will look at are Weight Watchers International (WTW), USANA Health Sciences (USNA), GNC Holdings (GNC), Walgreen (WAG), and ChromaDex (CDXC.OB).
Weight Watchers International, trading at about $51. This juggernaut has a market cap just south of $3 billion and sports an attractive price to earnings ratio of 13.31. It also has a great price to earnings growth ratio of 0.75. There is no price to book as the result of a negative book value per share of -$28.55. Return on equity is unreported also...not a good sign. Meanwhile, quarterly year-over-year revenue and earnings growth break bad, with revenue in the "N/A" category and earnings in negative territory at -25.80. A review of the last 4 quarters show modest improvement in revenue growth but shrinking net income. The balance sheet reveals some serious long term debt with very little on the cash and cash equivalent side as an offset. The company's financial strength is marginal and the stock is overvalued on a discounted cash flow basis by more than 41%. There is no published debt to equity ratio and the current ratio is an embarrassing 0.18. The stock pays a dividend yielding 1.4% but even with a payout ratio of 14%, that has to be under pressure.
Trading at around $40, USANA Health Sciences enters the healthcare sector with a market cap of about $600 million. Its niche is nutritional supplements and personal care products with global ambitions. USANA Health Sciences has a price to earnings ratio of 11.65, a price to earnings growth ratio of 0.61 and a price to book of 3.15. It also has a robust return on equity of 31.03% and smart quarterly year-over-year revenue and earnings growth of 7.40% and 21.20%, respectively. The company has no debt, which. in this case, is why the company gets an "N/A" from Yahoo! Finance and a solid 2.01 for its current ratio. The stock pays no dividend and is undervalued 18.17% on a discounted cash flow basis.
GNC Holdings has around $4 billion in market capitalization and trades at about $38 per share. Not cheap, the stock has a price to earnings ratio of 22.22, a price to earnings growth ratio of 0.94 and a price to book of 3,89. GNC provides shareholders a decent return on equity of 19.48% quarterly year-over-year revenue and earnings growth are an impressive 23.4% and 543.5% respectively. I not elated with regard to GNC's debt to equity which is an all too steep 85.14. The current ratio is more than satisfactory at 2.95. The stock provides shareholders a miniscule dividend yield of 0.6% against an equally stingy payout ratio of 6%.
Walgreen is no small player in the drug store industry, it trades at about $31 per share and has a market cap around $27 billion. Walgreen has a value oriented price to earnings ratio of 10.65, a price to earnings growth ratio of 1.12 and a price to book of 1.77. Return on equity at 17.24% is just..okay. At first blush, things seem to fall apart around the quarterly year-over-year revenue and earnings growth statistics, coming in at -3.4% and -10.9%, respectively. However, the full 12 month year to year comparison paint a positive picture on both counts. Walgreen's financial strength is unquestioned. It has a debt to equity and current ratios of 15.96 and 1.54 respectively. Walgreen is also generous with its dividend which yields 2.9% against a payout ratio of 31%. On a discounted cash flow basis, the stock is undervalued by more than 63%. I've made the comment in the past that this is a "Buffett quality" stock and I still believe that.
ChromaDex is the "odd man out" in this litter in terms of its share price at less than $1. It has a market cap of around $69 million and fundamentals not meant for the squeamish. I won't dwell on those in the context of this piece. Let's just acknowledge that they parallel a biotech startup. Enough said? What they do not have in fundamentals, they have in proprietary products, which brings us to--yes, blueberries. Though tagged as a basic materials enterprise in the major diversified chemical industry, the company provides nutritional and food supplements to the food and nutraceutical industry. For the past several years, however, they have been eyeing the retail market and have developed an exciting line of innovative BluScience dietary supplements containing a proprietary ingredient found in the blueberry. ChromaDex calls it pTeroPure and produces it synthetically through an exclusively licensed process.
The positive health effects associated with the polyphenols contained in the blueberry have been researched extensively both here in the United States and abroad. The health benefits are real and include anti-aging properties, heart health benefits, memory boosters, energy boosters and perhaps the most profitable benefit, appetite control. The ChromaDex BlūScience line is on the shelves at GNC stores and Walgreen stores around the nation. A potential boost for store revenues but a possible negative catalyst for a stock like Weight Watchers International. As a master of the obvious, I can tell you it clearly means big things for ChromaDex. You can read more about the health benefits of the humble blueberry here and reach your own conclusion with regard to which stock we looked at today offers the most promise for your portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.