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Gorge On Nutrisystem's Yield

Apr. 12, 2018 3:35 PM ETNutrisystem, Inc. (NTRI)10 Comments
Patrick Doyle profile picture
Patrick Doyle


  • In my view, this is an excellent entry price for Nutrisystem. The shares are down to a point where they are yielding just under 3.5%.
  • In addition, covered calls offer an opportunity to enhance yield further.
  • The market is forecasting a ridiculously pessimistic (and ahistorical) growth path here. I recommend taking advantage of the market's pessimism and buying.

The shares of Nutrisystem Inc. (NASDAQ:NTRI) are down about 46% over the past year, and that has me intrigued. I think the current price is a great entry point for long-term investors and I’ll go through my reasoning below by looking briefly at the business itself, and by focusing in on the financial history. I’ll model what I think is a reasonable future price based on the dividend, and I’ll suggest a way to enhance yield even further using covered call options. I’ll conclude with a discussion of the stock itself, as distinct from the business.

The crux of the argument is as follows: Although management is predicting softer revenue growth in 2018, the shares have already reacted to that news (down about 12% last month, down massively over the past twelve months). For that reason, I think all of the bad news is “baked in,” and investors buying today would be buying at a time when the risk of further capital loss is relatively low.


Nutrisystem is a provider of weight loss solutions and weight management products and services. The company's program customers purchase monthly food packages, consisting of breakfasts, lunches, dinners and snacks and flex meal plan recipes. Nutrisystem offers more than 150 menu options at different price points and most of the customer's order on an auto-delivery, subscription type basis. The vast majority of sales (92%) are from online or over the telephone, the balance coming from retail sales.

In my view, Nutrisystem’s e-commerce, direct-to-consumer business model provides flexibility which allows the company to manage marketing expenses and react more dynamically to changes in customer demand. Although I like this model a great deal, there are two primary risks embedded in it in my view. Although the e-commerce, direct to consumer model is more flexible and less expensive than traditional retail, the

This article was written by

Patrick Doyle profile picture
I'm a quant investment newsletter writer who marries fundamental analysis with the latest research in momentum. Over the past few years, I’ve developed a piece of software that helps me track the level of optimism and pessimism embedded in stock price. I seek to challenge the assumptions embedded in price by profitably exploiting the disconnect between what the market thinks and what is a likely outcome. I invest in those companies that have a greater than average chance of giving us all a surprise in the next few months.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in NTRI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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