Weight Watchers International, Inc. (WTW), NutriSystem Inc. (NTRI), Medifast, Inc. (MED): Three Weight Loss Companies Just Got A Huge Boost

Medical and Multi-Level

Medifast, Inc. (NYSE:MED) takes a decidedly medicinal approach to weight loss. The company sells replacement meals, one-on-one support via a “health coach,” runs Weight Control Centers, and partners directly with doctors. That could give it a leg up on the other two companies since it already has an in at the doctor’s office.

Sales have grown each year for a decade, but have really taken off since the recession, more than doubling since 2009 to over $350 million. Earnings have been more volatile, but the company has earned over a dollar a share in each of the last three years and hasn’t lost money in any of the past ten years.

The only drawback is that there is a multi-level marketing aspect to the program. While this has helped push growth, this model doesn’t get viewed as favorably by some customers and many regulators. That could make the switch to third-party payments more complicated. Still, the company has a solid and growing business, and should benefit from the AMA’s ruling. You just have to be willing to invest in its business model.

The Holy Grail

Third-party payments are the Holy Grail when it comes to medical products and services. The AMA is setting up the weight loss industry to qualify for such payments. That will change the market and entrenched industry players like Weight Watchers International, Inc. (NYSE:WTW), NutriSystem Inc. (NASDAQ:NTRI), and Medifast, Inc. (NYSE:MED) should be among those that benefit.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Three Weight Loss Companies Just Got A Huge Boost originally appeared on Fool.com and is written by Reuben Brewer.

Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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