Is WW International Stock Still Good Value Post The Recent Rally?

+33.37%
Upside
4.75
Market
6.34
Trefis
WW: WW International logo
WW
WW International

WW International (NASDAQ:WW) stock has risen by nearly 20% over the last month (about 21 trading days). The broader markets have seen some gains over the past month, with the S&P 500 up almost 3% driven by signs of cooling inflation and expectations of more moderate rate hikes by the Federal Reserve. WW stock has seen a more substantial rally recently given securities filings indicating insider buying by its CEO and also possibly due to the fact that the company’s valuation is also quite depressed with the stock down over 65% over the last year.

So what’s the outlook like for WW stock? There are some risks that we see for WW. The company is highly leveraged with total debt standing at over $1.4 billion, compared to its market cap of under $400 million presently. This is a concern in a rising interest rate environment. Competition in the weight management space is also intense, driven by a wave of new-age apps and social media influencers. However, we think that there are some reasons to remain positive about WW stock at current levels. The company has also been fairly consistently generating free cash flows despite the recent headwinds, which is a positive. WW has been undertaking several cost-cutting measures, cutting down on the variety of consumer products while phasing out poorly performing services.  The risk-to-reward trade-off for WW appears a lot more favorable, with the stock trading just about 0.3x forward revenue, a fraction of the 2.5x forward revenue value it traded at in mid-2021.  We have a $6 per share price estimate for WW International stock, which is 35% ahead of the current market price of about $4.40. See our analysis WW International Valuation: Expensive or Cheap for more details on WW’s valuation and comparison with peers. Check out our analysis on WW International Revenue: How does WW Make Money for an overview of WW’s business model, key revenue streams, and how they have been trending.

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Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 WW Return 15% 15% -61%
 S&P 500 Return 4% 4% 79%
 Trefis Multi-Strategy Portfolio 8% 8% 241%
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[1] Month-to-date and year-to-date as of 1/15/2023
[2] Cumulative total returns since the end of 2016

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