Weight Watchers International Inc Stock Upgraded (WTW)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Weight Watchers International (NYSE: WTW) has been upgraded by TheStreet Ratings from sell to hold. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.

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Highlights from the ratings report include:
  • WTW, with its decline in revenue, underperformed when compared the industry average of 2.4%. Since the same quarter one year prior, revenues fell by 14.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for WEIGHT WATCHERS INTL INC is rather high; currently it is at 60.68%. Regardless of WTW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WTW's net profit margin of 13.58% is significantly lower than the industry average.
  • Looking at the price performance of WTW's shares over the past 12 months, there is not much good news to report: the stock is down 33.34%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than 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.
  • WEIGHT WATCHERS INTL INC's earnings per share declined by 17.4% 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 $3.63 versus $4.33 in the prior year. For the next year, the market is expecting a contraction of 49.3% in earnings ($1.84 versus $3.63).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Diversified Consumer Services industry average. The net income has decreased by 16.8% when compared to the same quarter one year ago, dropping from $64.92 million to $54.00 million.

Weight Watchers International, Inc. provides weight management services in North America, the United Kingdom, Continental Europe, Australia, New Zealand, and internationally. The company operates through North America, United Kingdom, Continental Europe, and Rest of World. Weight Watchers International has a market cap of $1.36 billion and is part of the services sector and diversified services industry. Shares are down 25% year to date as of the close of trading on Wednesday.

You can view the full Weight Watchers International Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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