Nutrisystem was on a downtrend since last few years. There has been a rebound since November last year, and the stock is significantly up from the lows in November. But recent volumes data indicates that the volume support is not there, and the upward momentum is missing. The good part is that the management guidance for 2013 indicates that the company is likely to deliver a net income of 23 to 33 cents per share. Compared with the declining performance on the revenues and net income front over the last few years, this turnaround should provide some strength to the stock during the next few quarters. However, the company's estimate for the first quarter of 2013 remains negative with an expected net loss between 3 to 8 cents per share. In any case, the recent up move indicates that the market may begin to factor some of this expected turnaround. Of course, the management needs to deliver on its promise, and an slippage will be very negative for the stock. The reasons given by the company for dismal performance over the years include economic downturn leading to lower sales and margins, and increased competitor activity. Now that the economies around the world may be limping back to normal, there can be some help from that to boost the revenues. However, the competition is on the rise, and players like Chromadex (CDXC) (with products like BluScience) have achieved success in their products. NTRI would do well to identify similar successful products, and sell them through its outlets. On the upside, the first level to cross will be the 200 day moving average of $8.96, and on the downside the 50 DMA would provide support at $8.52. Despite the downtrend, the company has continued to pay dividends over the years and the current price makes the yield very attractive. Of course, dividends without earnings are not easy to sustain, and it is important that the promised turnaround happens quickly to support capital appreciation and dividend growth.
