Medifast, Inc.

MED Details

Medifast, Inc. (NYSE: MED) is a US-based firm that develops, distributes, and sells weight-loss, weight-management, and healthy-living products. The company's income comes from point-of-sale transactions for weight loss, weight management, and other consumable health and nutritional items conducted through an e-commerce platform.

Latest Updates:

• Accelerated Share Buy Back Program: On June 1, 2022, MED stated that it had agreed into an accelerated share buyback agreement ("ASR") with JPMorgan Chase to repurchase USD 100 million of its common shares. This ASR indicates confidence in Medifast's potential to generate quick, long-term growth and value for all stakeholders.
• MED Introduces State-of-the-Art R&D Workspace anticipating Continued Rapid Growth: On May 10, 2022, MED announced the inauguration of the Medifast Product Innovation Center, a new research and development centre. It combines cutting-edge office, lab, and pilot plant rooms to boost R&D, packaging engineering, quality assurance, and food regulation operations.

Q1 FY22 Results:

• Strengthening Revenue: The rise in the number of active earning OPTAVIA Coaches and the productivity per active earning OPTAVIA Coach in Q1 FY22 drove revenue up 22.6% to USD 417.6 million from USD 340.7 million in Q1 FY21.
• Bottom-Line Performance: Based on roughly 11.6 million shares of common stock outstanding, net income in Q1 FY22 was USD 41.8 million, or USD 3.59 per diluted share. Based on roughly 11.9 million shares of common stock outstanding, net income in Q1 FY21 was USD 41.1 million, or USD 3.46 per diluted share.
• Robust Balance Sheet: The Company's balance sheet remained robust as of March 31, 2022, with cash, cash equivalents, and investment securities totaling USD 122.1 million, up from USD 109.5 million on December 31, 2021. The Company was free of interest-bearing debt as of March 31, 2022.

FY22 Guidance:

• Raising Revenue Guidance: The company raised its full-year sales projection for 2022, now expecting USD 1.78 billion to USD 1.84 billion, up from the previously indicated range of USD 1.72 billion to USD 1.79 billion.
• Increased Profit Guidance: Full-year 2022 EPS is expected to be between USD 14.60 and USD 16.05, up from the previously indicated range of USD 14.50 to USD 16.00. The updated full-year 2022 profits projection contemplates an effective tax rate of 24.25 to 25.25%. The profits forecast excludes a one-time payment to Ukrainian refugees in Q2 FY22.

Key Risks:

• Competition Risk Between Existing and Rising Players: Several important and rising competitors compete directly with MED in the weight management market, offering items such as digital tools, app-based health, and wellness monitoring systems, and so on. If demand for these competitors' goods increases, it might hurt MED's bottom line.
• Social Media and Marketing Risk: The business depends on the effectiveness of advertising and marketing programs, including the strength of the Company's and OPTAVIA Coaches’ social media presence, to attract and retain clients. Use of social media may materially and adversely affect reputation, leads to fines or other penalties, which may adversely impact sales of products and services.   

Valuation Methodology: Price /Earnings per Share Based Relative Valuation

(Source: Analysis by Kalkine Group)

Stock Recommendation:

MED’s Coach metrics have accelerated significantly, and yearly financial outlook has been raised, both are strong indicators of company's fundamental strength. MED is improving the OPTAVIA client experience to increase their productivity. All of this suggests that the company has a lot of room to grow in the health and wellness industry. MED has a strong foundation on which to build long-term value for its investors.

MED’s stock price has fallen 41.65% in the past twelve months and is leaning towards the lower of its 52-week range of USD 329.32 to USD 154.67. Based on previous correction in the stock, revenue strength, consistent margins, robust business model, related risks, and current valuation, we recommend a "Hold" rating on the stock at the current market price of USD 187.75 as of June 02, 2022, at 08:35 AM PDT.

1 Year Technical Price Chart (as of June 02, 2022, at 08:35 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.

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