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Weight Watchers looks appetizing

November 6, 2012: 1:55 PM ET

Click the chart for more on Weight Watchers.

Shares of Weight Watchers surged Tuesday, a day after the company behind the point-based diet system reported quarterly earnings that beat analysts' expectations.

Weight Watchers (WTW) stock jumped 16% to about $55.50 a share.

The stock has taken a beating since hitting a high of $82 in March. But analysts say the company stands to benefit over the long term from its leading position in the weight loss market at a time when obesity is on the rise.

"We continue to have a positive long-term view of the company and shares appear fundamentally undervalued," said Morningstar analyst Peter Wahlstrom, in a research note.

Shares of other companies that provide weight loss services, such as NutriSystem (NTRI) and Medifast (MED), also gained Tuesday.

Weight Watchers said late Monday that earnings per share rose 10% to $1.20 in the third quarter, reflecting the completion of a tender offer and share repurchase program.

Analysts surveyed by Thomson Reuters were expecting earnings of $1.07 per share.

Despite the larger-than-expected gain in earnings per share, Weight Watchers said net income fell 16% in the quarter to $67.4 million, and sales were marginally higher at $430.6 million.

Weight Watchers also lowered the top end of its projected profit for the year to $4.10 per share from $4.20 per share previously.

On the bright side, the company continued to grow its online subscriber base, rising 20% for the year to 2 million.

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Ben Rooney
Ben Rooney
Staff writer, CNNMoney

Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news. Follow Ben on Twitter: @ben_rooney

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