DIET

[Stocky2000]

i like stocks that move from the MA 50 when they build i little base...and then start to move up....eyii had similar chart when it moved up 100% 2 weeks ago.....sure diet is not an otcbb...but the chart i like so i have to buy.....thanks david for mentioning this stock again....

[Stocky2000]

eyii like diet

[Stocky2000]

eyii like diet

not much difference ))))

[Stocky2000]

what the hell happens here....400% more visitors (traffic) today at alexa.com 

http://www.alexa.com/data/details/traffic_details?q=www.ediets.com&url=ediets.com

[David Randolph]

No, I'm not looking for revenge on DIET and I'll trade it like any other stock (once I lost 25% on this stock). I just continue to believe the company's market opportunity is huge. They didn't start well with the fresh cuisine programme, but now they're making a second attempt, as they merge www.ediets.com and www.nutrio.com.

Here's an analysis I wrote on November the 12th:

«1. Introduction

Besides being one of my largest percentage losses (-25%), DIET taught me an important lesson: you can never be certain about future prospects of a company. At the time, when it was trading around $7 or $8, everybody thought the Fresh Cuisine programme would increase revenues and profits, and DIET would follow the footsteps of NTRI. Instead, revenues fell and EPS turned negative. The stock plunged 65%.

So I'm curious about the current valuation and prospects. Is this the right time and price to invest in DIET shares?

2. Profile

eDiets.com, Inc. (DIET) engages in the development and marketing of Internet-based diet and fitness programs primarily in North America and western Europe. It offers online diet, fitness, and recipe services. (full profile here)

3. Technical Analysis
3.1. All History Chart



Up and down, up and down, but DIET is at about the same price it was back on its IPO in 2000.

3.2. Medium Term Chart



There's that gigantic gap down, after a quarterly earnings release that was a disappointment. DIET has been on a descending trend ever since. But, just recently, there were some signs of life, also due to an earnings report.

3.3. Short Term Chart



The short term chart shows the possibility of an inverted head and shoulders pattern. DIET must close above $3.68 to confirm this bullish reversal pattern. Let's make some fundamental tests now.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



The company has been increasing the number of shares issued and outstanding. I don't like that, as it increases the market cap without the corresponding rise on the share price. Current market cap is 24.3 million*$3.41 = $82.86 M.

4.2. Liquidity



DIET has a weak balance sheet.

4.3. Revenues



Revenues are expected to decline by about 4% this year in comparison to 2005. This happened for the first 9 months of the year. The revenue multiple is $82.86 / $50.89 = 1.63.  The average revenue multiple for the "Internet Information Providers" industry is 3.79. For NTRI, which has a similar business model, it is 4.37. So DIET seems very cheap at this point, exclusively considering the revenue multiple.

4.4. Profits



This is a very irregular EPS picture, with more losing years than profitable ones. It looks like the company is still looking to find its business model. Let's break this to a quarter by quarter basis:



The company said on Thursday that it returned to profitability, with a $0.02 EPS. Expectations for the next two quarters are for a loss of ($0.01) and ($0.09), respectively. I guess there's room for a positive surprise here.

5. General Overview

Here are some recent news excerpts:

- «We also embarked on the integration of our Nutrio.com and eDiets.com technology platforms into a single asset that we believe will support lifetime relationships with our business and consumer customers. Nutrio.com is exhibiting rapid growth and has signed, or is in the process of signing, five new contracts as well as continuing to expand its business with existing clients."»

I remember that a 3 Stocks subscriber's wife said she didn't like the name ediets.com, because she didn't like to think she was on a diet. She preferred the name NutriSystem. Perhaps many women felt like that, and ediets.com bought www.nutrio.com and is integrating the two websites. 5 new contracts looks good, since Nutrio had just 8 when it was acquired. Anyway, nobody knows the value of these contracts.

I just love the idea of food delivery to an online community concerned about health and nutrition. I think it makes perfect sense. I can't figure out why NTRI is doing so well, with $560 M in 2006 sales and $2.28 B in market cap, and DIET can't do it.

The two companies were so close just a couple of years ago, but now NTRI is 27 times bigger than DIET. Perhaps the new President of DIET can help turn things around, because there's no doubt the market is there for the company, a huge market.

I don't like the increase in the number of shares outstanding, I don't like the balance sheet, I enjoy the revenue numbers and I dislike the EPS trends (or lack of). But I love the sector and the business. Shouldn't I just buy the leader, NTRI, and leave DIET alone?

Perhaps I should, but the opportunity for upside seems so much larger on DIET, with just $82 M in market cap and an enormous market potential.»

6. Trading Plan

Buy DIET tomorrow between $4.20 and $4.25, 6.66% of capital as always.

Here's the updated chart:

[David Randolph]

There's an interesting article about DIET on Motley Fool:

eDiets Still Starving

It doesn't say anything new, or that I wasn't aware of, but it's a good perspective and explanation to why the share price fell from around $8 to $3.

Some highlights:

- «Recently, the company's founder resigned from the board and has sold 4.3 million of his shares to Prides Capital Partners, an investment firm that focuses on small-cap companies.»

I like this. The man wasn't doing a good job (he's kind of old for this business, 72 now) so he left the company (his shares were bought/sold at $5.05 a share).

- «But eDiets is trying to make up for this shortfall. For example, there is more emphasis on selling advertising on its portal site, and the company recently launched a food delivery service that includes chef-prepared offerings that meet personalized diet plans.»

A year ago the food delivery service was called Fresh Cuisine, remember? Now it is eDiets Express.

I still don't understand why they have so much trouble selling such a great service as this. One of 3 Stocks Honours Members, I can't remember his nick now, tried the service and loved it ! I know my wife would order this for sure, if we lived in the US.

Why do they have such a small banner advertising this service on their website? One actually needs to scroll down to see the banner

Well, NutriSystems website isn't much better, what an horrible design, don't you think? Still, NTRI is a $2.36 B market cap and DIET is just $103 M.

I think the market opportunity is so big for DIET that management won't be able to ruin it. I love the recent management change, let's see if this new guy from Nutrio can put the company on the right path.

My money is on it.

[Amarens]

Why do they have such a small banner advertising this service on their website? One actually needs to scroll down to see the banner

Well, NutriSystems website isn't much better, what an horrible design, don't you think? Still, NTRI is a $2.36 B market cap and DIET is just $103 M.

As owner of a graphic design agency I have to say the design is actually quite good because it does not give me any appetite...

Amarens

[David Randolph]

Lol Amarens, well thought

DIET was the best performing stock on the 3 Stocks on Fire Portfolio yesterday, and it was down 0.24%

There wasn't any news or technical developments, I'll continue holding it without restrictions.

[David Randolph]

I'm starting to know this www.nutrio.com business a bit better. They had just 8 clients, but added or were in the process of adding 5 more this latest quarter.

I think it works the following way. For example, 3 Stocks on Fire has 8,000 registered users. We could sell Nutrio's diet plans and meal delivery service to our users. We would take a bit of profit and they would take the rest. Another deal is, imagine a company with, say, 5,000 employees. They can provide DIET's plans and meals to their employees, promoting an healthier lifestyle.

They're integrating the www.ediets.com website and www.nutrio.com, so they have two solutions in one website, direct to consumers and direct to businesses.

Nutrio is a better name than eDiets, I wonder which one they'll adopt. This investment is a bet on management and on a great market opportunity. The 3 Stocks on Fire Portfolio can make 10 times its money on DIET or lose 20 or 30% ...

I'll continue holding DIET.

[David Randolph]

I agree with this guy on Yahoo:

did you listen to cc?
1 - nutrio is much better than expected
2 - meal delivery will be huge.....my take is the street doesnt believe ediets is working fast enough to get into this market full scale, but even if they drag their feet, there is a ton of money to be made in meal delivery. not if for ediets, just when.

might get an upgrade and climb to 5-ish prior to next quarter.

In fact, I should listen to the latest conference call. I'll do it for the next update, no time now.

I'll continue holding DIET.

[David Randolph]

Listened to the Q3 earnings conference call, here are some highlights:

- The subscribers business is slowing down a bit and will probably slow even more on Q4 due to seasonal factors. It represented 78% of revenue versus 87% a year ago.
- Nutrio's revenues were $0.7 M for the quarter, with 8 contracts. They signed or are in the process of signing 5 new contracts this quarter, so this may represent a 62.5% increase in this business, to $1.14 M a quarter.
- The meal delivery service provided just $0.7 M in revenues in Q3, or 5.75% of revenues.
- The advertising on the www.ediets.com website provided 7.4% of revenues.
- They licenced their operations in Europe and Brazil, which had $0.8M in revenues and $0.4 M in losses in Q3.

The company is testing and refining the meal delivery service and will relaunch it. They already changed the name from Fresh Cuisine to eDiets Express. Although people made several questions on the meal delivery service, they declined to answer most of them, not providing details, for competitive reasons. They say they will be able to provide details on the Q4 cc.

My guess is, given the name change and all, they will provide a cheaper meal delivery service when they relaunch (Fresh Cuisine implies better quality and higher price than eDiets Express). I think they will move closer to NTRI's model.

Anyway, it still is an incipient part of the business. But I expect Nutrio and eDiets Express to ultimately grow from this small base, making DIET a 10 or 20 times larger company, like NTRI is (28 times larger). But this won't happen overnight, it will take a lot of patience.

I have patience. I'll continue holding DIET whatever happens to the share price.

[David Randolph]

There weren't any news out during the weekend and no new technical developments, as DIET is still trading within the $3.80 - $4.8 trading range.

I'll continue holding DIET.

[shawFund]

Hi, David:

   Nice to hear from you again.

I bught DIET on October 4 with a price of $2.95 in my portfolio.

Reason: I checked its historical chart and the stock always makes big gains at year end and year start. So called year end rally.

In 2003, it went from $3.00 to over $9.00 in two month. In 2005, it traded straight up from low of around $4.00 to a high of $8.50.

But in 2005, it only went up from $3.00 to $5.00.

So I am just looking for another year end rally and it is about half way to the low target of $5.00.

I will be very careful once it reached $5.00.


Will hold it at least one more month to see how it develops.

[David Randolph]

Thanks for your warm welcome shawFund, I'm pleased to read your analysis too

You have a nice entry price on DIET . Do you really believe those seasonal trends? I don't know man, everytime somebody talks about the Stock Traders Almanac and seasonals, they always seem to fail.

But I wish you're right on DIET !

Nothing new happened on DIET, except the great news that shawFund is holding the stock . I'll keep on holding it too, although my motivations are different.

[David Randolph]

DIET had some pick up in volume and a nice 3% rise, but nothing changed on the technical or fundamental picture. Nothing changed on my trading plan either.