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Weight Watchers (WTW) Soars to a 52-Week High, Time to Cash Out?

Have you been paying attention to shares of Weight Watchers International WTW? Shares have been on the move with the stock up 23.6% over the past month. WTW hit a new 52-week high of $86.85 in the previous session. Weight Watchers International has gained 94.1% since the start of the year compared to the 2.9% move for the Consumer Discretionary sector and the 23.7% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on May 3, 2018, Weight Watchers International reported EPS of $0.31 versus the Zacks Consensus Estimate of $0.06 while it beat the consensus revenue estimate by 8.84%.

For the current fiscal year, Weight Watchers International is expected to post earnings of $2.87 per share on $1.57 billion in revenues. This represents a 73.94% change in EPS on a 19.82% change in revenues. For the next fiscal year, the company is expected to earn $3.66 per share on $1.75 billion in revenues. This represents a year-over-year change of 27.64% and 11.46%, respectively.

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Valuation Metrics

Weight Watchers International may be at a 52-week high right now, but what might the future hold for WTW? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Weight Watchers International has a Value Score of C. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 29.9X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 30.2X versus its peer group's average of 14.5X. Additionally, the stock has a PEG ratio of 2. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Weight Watchers International Inc Price and Consensus

 

Weight Watchers International Inc Price and Consensus | Weight Watchers International Inc Quote

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Weight Watchers International currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 or 2 (Buy) and Style Scores of A or B, it looks as if Weight Watchers International fits the bill. Thus, it seems as though WTW shares could still be poised for more gains ahead.


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