Medifast, Inc.

MED Details

Medifast, Inc. (NYSE: MED) is a global health and wellness company that develops and distributes nutritional products and strategies to help people lose weight, maintain weight loss, and live a healthy lifestyle. Its coaches teach the skill of establishing holistic, healthy habits through its unique "Habits of Health" Transformational System in the United States and Asia Pacific (Hong Kong and Singapore) through its community, OPTAVIA.

Latest News:

• Quarterly Dividend: On March 17, 2022, the company announced a quarterly dividend of USD 1.64 per common share, payable on May 09, 2022, to shareholders of record on March 29, 2022.

FY21 Results:

• Surge in Revenue: In FY21, the company's total revenue amounted to USD 1.53 billion, representing a 63.25% increase year-over-year from USD 934.84 million in FY20.
• Revenue per Active Earning OPTAVIA Coach: In Q4FY21, MED reported that the average revenue per active earning OPTAVIA Coach was USD 6,321 vs. USD 5,932 for FY20, driven by an increase in the number of clients managed by each coach, along with an increase in average client spend.
• Sharp Uptick in Net Income: The company's net income increased to USD 164.03 million in FY21 from USD 102.86 million in FY20, representing diluted EPS of USD 13.89 in FY21.
• Cash and Debt Position: The company had USD 109.54 million in cash and cash equivalents as of December 31, 2021, and no outstanding debt.

Key Risk:

• Dependence on Third-Party Manufacturers: Third-party manufacturers supply most of MED's food and other products. If these manufacturers fail to provide products with inadequate quantity/quality on schedule and at acceptable costs, their financials and reputations may suffer.
• Competition Risk: In the weight management sector, several significant and emerging players compete directly with MED, supplying various products such as digital tools, app-based health and wellness monitoring systems, and so on. If demand for these rivals' products rises, it could harm MED's operating results.

Outlook:

• FY22 Guidance: In FY22, the company anticipates revenue of USD 1.72–1.79 billion and EPS of USD 14.50–16.00.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

MED's stock price has fallen 37.56% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 161.44 to USD 336.99. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 150.09.

Considering the correction in the stock price, robust dividend yield, positive outlook, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the current price of USD 174.485, down 2.17% as of May 02, 2022, at 09:22 AM PDT.

Three-Year Technical Price Chart (as on May 02, 2022, at 09:22 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

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

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

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