As indicated by typical sales data, the demand for service and product of companies in this sector has been strong and growing in US market in the past several years as a result of increasing spending in marketing and consumers’ education  of companies above the basic driver from obese and aging population.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

1. The demand for weight management service and products has been solid and growing fast in the past two years.

2. The growth in demand has been seen from different channels and business modes including the increase in weight loss programs participants, their spending on programs and products, sales base of direct selling channels, and increasing price of service and products.

3. The strong demand has also been confirmed by the fact that the performance of direct sales of weight management products has been better than that of other products.

4. It seems that demand has been very strong in US market and grown faster than in other regions.

Causes behind the trend

1. The obesity and the aging of population and public health care costs have always been the major drivers behind demand for weight loss and management services and products.

2. In direct selling business mode of weight management products, the real demand for products itself seems to be playing more positive roles in influencing sales than it is in the direct selling of products and services.

3. The increased spending of companies on education and marketing may be the direct reason of fast growth of sales in the past two years.

Industry Future

1. We believe that the upward trend in this sector will continue as the favourable factors behind solid demand do.

General Financial Performance of Companies In the Sector

It seems that demand for weight loss related service and products has been solid and growing in the past three years as indicated by the quick increase in weight loss programs participants and their spending, which contribute to fast growth in revenue of typical companies in this sector (20% and 10% for 2017 and 2016 respectively). It seems the US market has contributed most of demand and growth in the past two years.

The generally improved operating margin of companies (increased from about 14% to 17% in 2017) in this sector can be explained by leveraging of expenses as a result of sales increase.  The improved operating margin has come from improvement both in gross margin (from 51% to 52% of 2017) and in SG&A as percentage of sales (from 38% to 36% of 2017).

The typical average stock price/cash flow ratio is about 28 ranging from 17 to 40.

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