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Weight Watchers: A Little Debt-Heavy?

This is a well-known brand with a smart business plan--but the market seems to be missing the company's weak capital structure

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December 10, 2001 at 5:00 AM UTC

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Weight Watchers International (WTW ) went public just as the nation started its pig-out season. Stroke of genius or mere coincidence? I don't know, but investors are gobbling up the stock. From a Nov. 14 initial public offering at $24 a share, Weight Watchers added 23% its first trading day and kept gaining. The stock recently traded above $32 (chart).

In this post-Net Mania era, Weight Watchers' allure doesn't stop at the instant comprehensibility of its business plan (more fat people means more profit). Brightened by spokeswoman Sarah Ferguson, Duchess of York, the Weight Watchers brand attracts more than $1.5 billion in global sales. Unlike so many Net-era IPOs, Weight Watchers has let public investors in on an indisputably thriving business, with a long record of profits. After inspecting its financials, though, you may think twice before betting its stock will fatten your portfolio.