
Charting Weight Watchers (WTW) Stock: What's Behind the Jump
NEW YORK (TheStreet) -- A closer look at Weight Watchers International (WTW) - Get Report will help our readers understand the strengths and weakness of certain charts. On Wednesday, the Wall Street Journalran a story about the pain the shorts in WTW are experiencing.
The chart of WTW, above, is a simple, close-only chart. It is constructed by plotting the closing price of WTW each day and "connecting the dots." In reality we know more than just the closing price of WTW. We know the opening, the high, the low, the close and probably many more prices, but we only show the daily closing price. Easy to plot and easy to read, but too simple to glean any valuable information from.
In the chart above, we display WTW using Japanese candlesticks. Here, we plot the open, high, low and closing prices. This charting technique dates back to around the 1740s, before the U.S. even existed as a country. In this chart of WTW, there is a price gap -- or void -- between Friday and Monday. Monday's news of Oprah Winfrey's 10% stake in the company caused WTW to open sharply higher. This game-changing information is lost with the close-only chart. It is a little misleading in that someone might assume that WTW traded to $11 from $7 on Monday, when prices actually gapped up to $11 from $7. This gap shows the dramatic change in DEMAND for the shares of WTW.
The moral of this story -- choose the right chart for the job.
TheStreet Ratings team rates WEIGHT WATCHERS INTL INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate WEIGHT WATCHERS INTL INC (WTW) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WEIGHT WATCHERS INTL INC's earnings per share declined by 48.4% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, WEIGHT WATCHERS INTL INC reported lower earnings of $1.74 versus $3.63 in the prior year. For the next year, the market is expecting a contraction of 61.5% in earnings ($0.67 versus $1.74).
- Net operating cash flow has decreased to $33.73 million or 47.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 72.36%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48.42% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Diversified Consumer Services industry average, but is less than that of the S&P 500. The net income has significantly decreased by 48.4% when compared to the same quarter one year ago, falling from $54.00 million to $27.88 million.
- The revenue fell significantly faster than the industry average of 11.6%. Since the same quarter one year prior, revenues fell by 22.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: WTW










