Stock Analysts Still Don’t Get It – J. LaRosa

Stock Analysts Still Don’t Get It – J. LaRosa

When talking about the weight loss market, success is always related to qualitative factors: whether the company has products & services that dieters want, how effective the firm’s marketing and advertising is, execution by management, status vis-a-vis the competition, and strategic focus in the right areas. In real estate, it’s location, location, location. In the weight loss market, it’s good management, good management, good management. And, advertising drives demand.

The perfect example the past 4-5 years is Weight Watchers–so many management blunders, structural issues, and a CEO who didn’t understand the business led to declining enrollments since 2012. The opposite is true at Nutri/System, with a female CEO who DOES get the business, and a company that has different diet programs for men, women, seniors, and diabetics, plus multiple ties with retail partners to broaden its exposure. NTRI’s sales are growing in the double-digits while WTW sales until very recently were declining by double-digits. And, contrary to what all the analysts and reporters think, it’s NOT all due to free diet and fitness apps.

Yet, Wall Street analysts, due to their lack of education in marketing, still profess tunnel vision and an over-reliance on financial issues. They don’t ask the tough questions in quarterly conference calls–almost never related to marketing. It’s all about EBIDTA/financial metrics to them. Wrong. As a result, investors only get HALF the story. As a 28-year independent analyst of the weight loss market, I can tell you with 100% certainty that the qualitative factors are more important. They drive the financials–not the other way around.

Analysts — do your homework!

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