Medifast, Inc. (MED) is a manufacturer and distributor of weight loss, weight management, healthy living products, and other consumable health and nutritional products, explains Doug Gerlach, editor of Investor Advisory Service.
The company operates a direct-to-consumer sales model facilitated by a network of more than 32,000 fitness and wellness coaches who were all previously clients.
Medifast calls this the “Optavia” community (which was launched in 2017) and claims that it provides greater success for individuals who are disillusioned with dieting alone.
Medifast’s product lines include weight loss and management, meal replacement, and vitamins. More than 85% of orders are subscription-based meal plans, and the company claims 40 years of scientifically-backed results.
EPS are expected to decline to $5.82 for fiscal 2020 from $6.43 in fiscal 2019 as the effects of the pandemic weigh on the company, and then rebound to $7.32 in fiscal 2021.
We expect EPS and revenues to return to a longer-term growth rate around 15% after that, which corresponds to an average annual growth rate of 11.6% from the starting point of FY 2019’s earnings. Analysts on Wall Street are looking for long-term EPS growth of as much as 20%, so there may be some upside to our expectations.
Medifast’s stock currently trades at a P/E of 16.3 and is near the midpoint of its 52-week price range. The stock’s present yield is 4.4%, which provides a nice uplift to the capital appreciation potential.
On the downside, the lowest price supported by the dividend is $89. History suggests that at that price, investors who are interested in the dividend would step in to take advantage of the high yield that would result. If the stock re-approaches its average high P/E ratio of 24.9, the price in five years could reach $277.
