NEW YORK (TheStreet) -- Weight Watchers International (WTW) - Get Report , which specializes in weight management services through its company-owned and franchised global network, reported fiscal fourth-quarter revenue Thursday that missed Wall Street estimates, and investors should avoid the stock.
That the company reported double-digit subscriber losses for both in-person meetings and online subscribers for the quarter ended on Jan. 3, not to mention its $16 million loss, which reversed a profit in the year-earlier quarter, raises questions about its long-term viability.
And despite how cheap the shares now appear, value hunters shouldn't think twice about touching this stock as the worse isn't over. As of Friday morning, the stock was down more than 35% to $11.66, which means it hit a 52-week low.
Ahead of Thursday's report, Weight Watchers shares -- at Thursday's close of $17.56 -- had plunged more than 29% for the year, lagging almost every index.
But based on its consensus hold rating and average 12-month price target of $22, implying 25% gains, the value was tough to overlook. Not anymore.
Thursday's results affirmed what some investors already knew, that the best days of the New York-based company have come and gone.
Take a look at the chart:
The company's shares are down for every reasonable time period as far back as 10 years.
This means that shareholders who have held this stock since 2005 are likely underwater. And with analysts projecting that the company will post annual earnings declines of more than 5% over the next five years, those investors may not break even for a while.
Hurting the company, Americans have become more conscious about their weight. And with consumers moving more toward better eating habits, sparking growth in organic and natural foods, this has affected Weight Watchers negatively.
As consumers embrace healthier eating habits, they aren't subscribing to weight-management services, as evidenced by the company's 13.3% year-over-year decline in meeting subscribers. The fact that online subscribers fell 16.7% year over year will take a bigger toll on the company's bottom line because the online business takes up less overhead than the meeting business.
And if its current fiscal full-year business outlook serve as indication, the company doesn't expect things to improve quickly.
Expecting more revenue pressures, Weight Watchers projects full fiscal year earnings per share to be in the range of 40 cents to 70 cents. This means that the high end of its range is still more than 50% below Wall Street estimates of $1.43 a share.
To offset revenue and earnings pressures, the company announced plans to cut costs by about $100 million, saying that it "intends to finalize plans to resize its organization" in the first quarter.
But cutting costs can only go so far. Gutting the organization without a credible plan to increase the top line will yield little in terms of profits.
And with a net debt position of about $2 billion, according toYahoo! Finance, Weight Watchers will need to do more than just cut $100 million in operating costs to produce any value.
All told, the risk/reward scale on this stock tips to the negative side, and investors would be better served looking elsewhere for value.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.