Why Shares of NutriSystem Inc. Plunged 16% Today

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What happened 

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Shares of weight-loss company NutriSystem Inc. (NASDAQ: NTRI) fell as much as 15.6% in trading Thursday after reporting second-quarter earnings. At 3:55 p.m. EDT, shares were still down 12.2% for the day. 

So what

Strangely enough, NutriSystem said revenue jumped 30%, to $194.9 million, and net income was up 52%, to $24.4 million, or $0.80 per share. Results easily topped the $180.9 million in revenue and $0.61 per share in earnings that analysts expected.

Management also said they expected third-quarter revenue of $153 million to $158 million with earnings of $0.42 to $0.47 per share, and full-year revenue of $684 million to $694 million and earnings of $1.65 to $1.75 per share. These projections imply slowing growth in the back half of the year, which is really the only flaw I can spot in earnings. And even that may not end up being a problem if management is setting a bar they know they can beat. 

Now what

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It's surprising the stock is trading lower today, given the strong results, but sometimes, the market looks further into the future than we initially think to see where a company is headed. If growth is decelerating, it could be a bad sign for a stock trading at 32 times the high end of 2017 estimates. I wouldn't get too worried about the plunging stock today because NutriSystem is still performing well. It just wasn't a favorite of traders this quarter.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.