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Weight Watchers International: Cutting Through The Fat - Q1 FY14 Update
- WTW's business is beginning to stabilize, with management delivering some early turnaround success as borne out in the Q1 results being ahead of both previous guidance and consensus estimates.
- Near-term business outlook remains difficult as operational and capital structure challenges remain.
- Potential for significant upside for common stock holders should management successfully implement the turnaround plan.
- Evidence emerging that wearable activity and fitness monitors may be actually be fads, as previously asserted by WTW management.
- Potential credit opportunity for prospective investors who feel the equity may be too risky, with WTW's senior debt attractively priced at present.
Weight Watchers International - Is The Fat Lady Singing?
- WTW is currently valued at a 39% discount to a conservative estimate of intrinsic value for its business.
- Discount is due to 50%+ decline in share price over last 12 months, attributable to recent negative trends and business underperformance.
- Negative trends are temporary, while underperformance is attributable to operational issues which are all fixable - they are not indicative of permanent flaws in WTW's business model or prospects.
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