NutriSystem Inc. (NTRI): Medical Food

Automatic Growth

The company believes its Medical Nutrition business has “automatic growth potential as the world population ages and it becomes clear that specialized nutrition holds some answers to the problems linked to aging and the challenges of independent living.” The division has grown revenues by 50% since 2007, so this still small division clearly has potential.

Danone’s shares yield around 2.5%. Although they are near their highs, they have been on a generally upward path for a decade. The top and bottom lines are a little volatile and the dividend varies based on performance, but this is another relatively safe way to get in on the medical shift in the food industry.

Specifically Prepared Meal Plans

Although NutriSystem Inc. (NASDAQ:NTRI) is best known for its weight management food programs, it has introduced a meal plan for those with diabetes. This ongoing medical issue is a growing concern. The unique aspect of this company is that it controls virtually all aspects of the eating process. So, for those who find it too difficult to choose healthy foods themselves, NutriSystem Inc. (NASDAQ:NTRI) can step in and take choice out of the equation.

The economic downturn between 2007 and 2009 took a heavy toll on the company’s diet business. That makes sense since having someone else prepare your food for you isn’t cheap and is largely a discretionary purchase. Revenues have fallen in each of the last five years and now stand at about half of their pre-recession peak. However, the company has no debt and $35 million in cash and investments on hand, so it has plenty of staying power.

This is a high risk turnaround play on the diet business with a medicinal food kicker. And it had a recent yield of around 8%.

An Industry in its Infancy

The idea of medical foods is still in its infancy. However, partnering with two industry giants is a great way to gain relatively low-risk exposure to the space. NutriSystem Inc. (NASDAQ:NTRI) is a higher risk play, but could be a big beneficiary if prevention takes center stage for diabetes related illnesses and obesity.

The article Medical Food originally appeared on Fool.com and is written by Reuben Brewer.

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