It’s no news that obesity rates have reached alarming proportions in the United States. Soon, it will also become a fast-growing concern in the rest of the world as well. Fortunately, there are companies around the world working on solutions. Those who get in early by investing in companies that are likely to provide these solutions stand to make considerable gains.

Obesity is a very complex condition and is considered so serious because it can trigger many deadly diseases, and the rate at which it is growing is disturbing. Between 1980 and 2000, obesity in the United States more than doubled, according to the U.S. Centers for Disease Control. Today, two-thirds of Americans are considered either overweight or obese. And the World Health Organization estimates that, if trends in developed countries continue on their current trajectory, the global population of overweight individuals will increase 44% from 1.6 billion in 2005 to 2.3 billion by 2015. The obese population will grow even faster — from 400 million people five years ago to 700 million within five years, a whopping 75% increase.

But this obesity epidemic also opens the doors for a pair of industries to profit. As I mentioned last month, two high-yielding drugmakers could make huge profits from their diabetes treatments, a disease that is directly linked to obesity.

Another segment that will likely benefit from helping to solve this epidemic is the weight-loss industry. After all, Americans are at least trying to lose weight. A 2008 Gallup poll showed 96 million Americans were on a diet. Worldwide spending on weight-loss programs exceeds $59 billion, according to market research firm Marketdata Enterprises, which specializes in the diet market.

One of the most recognized weight-loss brands, as well as the No. 1 player in the niche for home-delivery weight-loss meals, is Nutrisystem (Nasdaq: NTRI). The company markets its low-calorie prepared meals directly to consumers through print and broadcast media, the Internet and through retailers such as QVC shopping network. CBS Money Watch recommended Nutrisystem in 2011 for having the least expensive home-delivery weight-loss program. 

As a stock pick, Nutrisystem may seem like an odd choice at first glance. After all, the company has posted four straight years of sales declines, while earnings per share (EPS) are expected to drop to between $0.45 and $0.50 per share this year from $1.12 a year ago. A look at the company’s cash flow, however, reveals hidden strength and value.

During the first nine months of 2011, Nutrisystem produced $54 million in cash flow — more than enough to cover $20.7 million in annual dividends and sustain the current 6.4% yield. This is no rarity, either: the company has generated at least double the cash necessary to cover its annual dividend every year since 2007. In fact, Nutrisystem has enough cash flow left over to fund large share repurchases, such as the $150 million share buyback announced in June, which represents nearly 45% of the company’s market capitalization. This repurchase should enhance 2012 EPS growth and dividend coverage by reducing the number of shares outstanding. 

Although sales growth has stalled due to competitive pressures and a soft economy, Nutrisystem has remained solidly profitable. Five-year operating margins averaging 16% exceed comparable peer margins of 10.5%. In addition, return on assets (ROA) is exceptional, having averaged 35.6% in the past five years. The balance sheet is also strong: Nutrisystem has $72 million of cash against $30 million of debt.

Management has big plans for coming quarters. The company is working on re-energizing top-line growth in 2012 with a revamped menu, aggressive advertising efforts, a new celebrity spokesperson (Marie Osmond is the most recent one), and new marketing strategies and distribution channels.

As part of this plan, Nutrisystem has begun marketing Nutrisystem D, a weight-loss program for patients with Type 2 diabetes. Using clinical studies that validate the program’s effectiveness, the company puts together science presentations geared toward health care professionals as part of its marketing efforts. The potential market for this program is huge, since 29 million Americans are already diagnosed with Type 2 diabetes and another 79 million are considered prediabetic.

Consensus analyst estimates look for Nutrisystem to produce 59% EPS growth next year and annual growth averaging 13% during the next five years. Nutrisytem shares are bargain-priced, with a price-to-earnings (P/E) ratio of about 16, which is below the company’s five-year average P/E of 19 and much less than the peer average P/E of 21. 

Risks to consider: Nutrisystem’s sales strategy for 2012 makes sense, but there is no guarantee of solid results. If  you decide to buy shares, then plan on monitoring the company’s performance or even selling shares in case the quarterly sales trend doesn’t improve next year. 

Action to take — > Nutrisystem’s hefty 6.1% yield should appeal to income investors. But given that its dividend hasn’t been raised since 2008, this is not my top choice for dividend-growth investors. If you’re looking for a weight-loss stock with growing dividend, then consider Herbalife (NYSE: HLF), which hiked the dividend 45% this year to a $0.80 forward annualized rate. That said, the stock is appealing, considering the sizeable yield and bargain-priced shares.