Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

52-Week Low Presents Buying Opportunity for This Name Brand: Weight Watchers International, Inc. (WTW)

More importantly, Weight Watchers produces a lot of free cash flow. For every dollar in sales, Weight Watchers earns about $0.20 in free cash flow.

Over the last decade, Weight Watchers International, Inc. (NYSE:WTW) averaged a 19.52% free cash flow margin. If it continues to earn this margin on average, then it will produce $357 million in free cash flow each year assuming revenues do not grow. This implies a free cash flow yield of 15.64%.

However, Weight Watchers has grown sales at a compound annual rate of 7.6% since 2003. If it can grow sales at just 4.5% each year and keep the same free cash flow margin, investors should expect an annual return in excess of 20% (including dividends).

Weight Watchers may not retain the same free cash flow margin and it may not grow sales at 4.5% per year. But it has a lot of room to fall short of those assumptions before the stock underperforms the market. Therefore, investors should strongly consider an investment in Weight Watchers.

The article 52-Week Low Presents Buying Opportunity for This Name Brand originally appeared on Fool.com and is written by Ted Cooper

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.