This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

January 29, 2009 - NutriSystem, Inc. (NTR-NASDAQ) provides weight management and fitness products and services in the United States and Canada. Its weight management program consists of a pre-packaged food program and counseling. The company also offers monthly food packages containing a 28-day supply of breakfasts, lunches, dinners, and desserts, which supplement its customers with fresh dairy, fruit, salad, vegetables, and low-glycemic carbohydrate items.

What's the number one New Year's resolution? To lose weight. NutriSystem has the products and service to help people realize that resolution, even if most of us don't keep it. But for the truly dedicated, NutriSystem can play a big part in parting with the pounds.

While earnings and sales are down from the previous year, the company is still only a little below last year. Sales were $776.8 million in 2007. For 2008, analysts predict the year finished with total revenues of $694.31 million. For 2009, they see a little lower number, $673.1 million. Earnings for 2008 most likely ended at $1.79, well below the $2.98 of 2007. For 2009, analysts expect $1.73. Earnings for the final quarter of 2008 will be announced about February 4 and should be 20 cents a share, down from 33 cents in the same quarter last year.

The stock reflects the disappointment investors have in the numbers. The price peaked in 2006 at $76.33 a share, having run almost straight up from its low of $1.09 in 2004. Now it's up from $10.01, hit late last year. When earnings go down, so does the stock. No surprise there.

The company is feeling the effects of a weak economy, like almost everyone else. It can be argued whether going on a diet is a luxury or a necessity, but the fact is that sales have slowed ever since the economy has. So why would an investor look at this stock now, when the economy is doing worse?

Because when the economy does recover, this stock can deliver strong earnings and has a decent dividend. It already pays 70 cents a share for a yield of 4.9%. If the company hits the analysts' estimates of $1.73 in 2009, the dividend takes only 40.5% of earnings to pay so it shouldn't burden the company. Also, earnings over the last 5 years have grown by 105% annually, on average. For the next 5, analysts suggest 16.67% a year, on average. Growth isn't what it used to be, but it's still decent.

Also, during the last few years, certain numbers jump out: Return on equity in 2007 was 74.2%. In 2006, 58.6%. In the last 12 months Operating margin was 13.65% with Profit margin at 8.46%. Return on Assets was 32.15%. And this was in a period when sales weren't as robust as previous years.

In other words, this company has delivered when times were good. It has what dieters want. It's somewhat natural to assume that when the economy heals, this company will once again deliver. A key component of that will be management. If the same management perseveres through this down time, it's probably a good bet that the same talent that drove sales and earnings in the past will do it again.

More numbers: Price to Book is 3.30. There's $58.05 million in cash as of the most recent quarter (September numbers). Total cash per share is $1.97. There is no debt. Current ratio is a robust 2.94. Book Value per share is $4.34. Beta is a palpitating 1.87. The 52-week high was on February 4, 2008 at $30.62. The low came on October 24, 2008 at $10.01. There are 29.59 million shares outstanding with a float of 27.72. Insiders own 9.85%.

While 2008 and 2009 will disrupt the company's strong growth, investors can take some comfort in a decent dividend and good management. Economic hardships can't be controlled, but the response can. Management has shown it knows how to manage and give shareholders value in good times. Now it needs to prove its capabilities during the tough times. If it does, and stays intact, when the economy turns, this stock could soar once again.

Company Web site: www.nutrisystem.com

- Ted Allrich