WW - Embedded Expectations Analysis - 2021 12 21
WW International, Inc. (WW) currently trades below corporate and historical averages relative to Uniform earnings, with a 12.0x Uniform P/E (Fwd. V/E').At these levels, markets are pricing in expectations for Uniform ROA to fade to 32%, accompanied by 5% Uniform asset growth.
Meanwhile, analysts expect Uniform ROA to remain stable at 61%-62% levels through 2022, accompanied by 13% Uniform asset shrinkage.
That said, given the surging demand for the firm's products and digital transformation, there is fundamental potential for stronger-than-priced-in performance.
If the company can capitalize on its demand and initiatives, it could drive Uniform ROA to 100% with 3% Uniform asset growth going forward, which would imply a stock price closer to $95, representing significant potential equity upside for the firm.
However, the firm's most recent earnings call suggests management may have concerns about recruitment, digital growth, and the workshop business.
WW International is a wellness company and provider of commercial weight management program. The company's Weight Management Program and Plan is comprised of a range of nutritional, activity, behavioral and lifestyle tools and approaches, and includes its food plan, known as SmartPoints. The company's services and products include digital offerings provided through its websites, mobile sites and apps, workshops conducted by the company and its franchisees, consumer products sold direct to consumers, licensed and endorsed products sold in retail channels, and publications. The company provides subscriptions for its digital products and for itsworkshops.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
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- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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