Nutrisystem, NTRI

[maxtower]

Does anyone have any thoughts on NTRI?

They have recently taken a huge hit due to lower earnings bringing what people thought was a growth stock back down to earth. Part of the problem seems to be that a lot of the business comes from people who are new to the program rather than continuing users. New user rates have declined somewhat. I think this is normal for the weightloss business. Many people switch from diet to diet never finding anything that works because they can't control themselves.
Typically the 4th quarter is bad for diet companies because who wants to diet during the holidays. However I was thinking this could be a perfect time to buy, since the new year's resolution folks could provide a bounce to earnings. A Canadian market entry is also expected in 1Q'08.

There is a 56% short percentage of float. What does this mean? Won't all these shorts reverse their position at some point to take their profits on the recent big downswing?

They have $0 debt. $3/share cash on hand. 10% free cash flow.

They have authorized up to $200 million in share repurchases. They only have about $117M in cash however. About 50% of the outstanding shares are held by insiders. Currently trading with a market cap of $850M, an aggessive buyback could really trigger some stock price movement especially if the shorts begin to cover.

What do you think? I don't have any experience with FA, so I am hoping to learn more about the process here. I think NTRI provides decent fundamentals with a decent chance at a catalyst if Q1 goes well combined with company repurchases.