Medifast, Inc.

MED Details

Medifast, Inc. (NYSE: MED) is a global health and wellness company that develops and distributes nutritional products and plans to help people lose weight, keep it off, and live a healthy lifestyle. It operates through its community, OPTAVIA, in the United States and Asia Pacific (Hong Kong and Singapore), where its coaches teach the art of developing holistic, healthy habits through its signature "Habits of Health" Transformational System.

Latest News:

• Quarterly Dividend: On March 17, 2022, the company declared 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. These manufacturers' financials and reputations may suffer if they fail to deliver products in sufficient quantity/quality on time and at reasonable prices.
• Competition Risk: Many significant and new players compete directly with MED in the weight management industry, selling various products such as digital tools, app-based health and wellness monitoring systems, etc. An increase in demand for these competitors' products could harm MED's operating results.

Outlook:

• FY22 Guidance: The company expects to generate revenue of USD 1.72 – 1.79 billion in FY22, along with EPS to the tune 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 39.37% 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 213.75.

Considering the significant correction in the stock price, robust dividend yield, positive outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing market price of USD 174.79, down 1.07% as of April 06, 2022.

Three-Year Technical Price Chart (April 06, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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.