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Medifast (MED) Stock More Than Doubles in a Year: Here's Why

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Medifast, Inc. (MED - Free Report) appears to be on a strong footing, with its shares having soared 125.1% in the past year, easily crushing the industry’s growth of 20.6%. Also, the company comfortably outpaced the broader Zacks Consumer Staples and the S&P 500’s respective increases of 22.3% and 37.8%.

This manufacturer and distributor of weight loss, healthy living and weight-management products has been benefiting from strength in its OPTAVIA lifestyle solution and coaching support system. This, along with benefits from other growth efforts, has been aiding the Zacks Rank #1 (Strong Buy) company, which was also evident in its first-quarter 2021 results. Encouragingly, Medifast’s 2021 guidance suggests year-over-year earnings and sales growth. Let’s take a closer look.

Solid Q1 Results & View

In first-quarter 2020, both earnings and sales saw significant year-over-year growth and cruised past their respective Zacks Consensus Estimate. Strength in OPTAVIA remained a strong driver. The company posted earnings of $3.46 per share, which crushed the Zacks Consensus Estimate of $2.72 and surged a whopping 121.8% on a year-over-year basis. Net revenues of $340.7 million soared 90.9% year over year and beat the Zacks Consensus Estimate of $287 million. Management anticipates revenues for 2021 to come in the range of $1.4-$1.475 billion. Full-year earnings per share are envisioned to be $12.69-$14.14. In 2020, revenues and earnings per share came in at $934.8 million and $9.14, respectively.

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Major Drivers

Medifast’s OPTAVIA lifestyle solution and coaching support system has been a major driver, given consumers’ growing inclination toward health and wellness. OPTAVIA follows a holistic approach by focusing on six key areas of a human being — weight, eating and hydration, motion, sleep, mind, and surrounding. Further, OPTAVIA combines scientifically proven programs, effective products and guidance from its coaches to help consumers lead a healthier lifestyle. Well, OPTAVIA-branded products formed 88.9% of consumable units sold in the first quarter of 2021, up from 79% in the preceding quarter. Total active earning OPTAVIA coaches jumped 61% to 52,500. Further, the average revenue per active earning OPTAVIA coach came in at $6,454, up from $5,333 in the same period last year. We note that the company’s constant focus on developing tools and programs to increase the efficiency of coaches has been yielding results.

Medifast has been speeding up its long-term supply-chain efforts to ensure that it is able to achieve the expected growth in the next few years. To this end, the company is focused on optimizing and increasing capacity by strengthening its network of co-manufacturers. This is likely to help the company meet the 2021 demand and provide it a manufacturing capacity of $2 billion. Further, the company is expanding its distribution network via expansions in existing facilities, along with building on current 3PL relationships and alliances to set up a distribution system, which is in line with its manufacturing capacity. Most of the expansion in the distribution capacity is likely to be witnessed in the third-quarter end.

Apart from these, Medifast is focused on making technological investments, as part of which it opened a new technology center in Utah at the beginning of 2020. We note that OPTAVIA coaches have been focused on utilizing technology, including the company’s own app-based platforms, along with social media channels and field-led training platforms. Gains from these efforts were witnessed in the first quarter. Certainly, Medifast’s focus on the development of a digital-first approach seems to be yielding results. The company’s constant investments in digital tools and its new, fully integrated mobile apps are likely to enhance the connection between clients and coaches.

Wrapping Up

Consumers’ increased inclination toward health, together with a solid OPTAVIA coach-based model, has been helping Medifast draw new clients. Notably, the company remains committed to making further investments to improve its infrastructure in order to aid growth. These upsides are likely to help the company to keep up the splendid momentum.

3 Other Stocks Worth Relishing

Darling Ingredients (DAR - Free Report) , which currently carries a Zacks Rank #1, has a trailing four-quarter earnings surprise of 29.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

J&J Snack Foods (JJSF - Free Report) has a Zacks Rank #1 and its bottom line outpaced the Zacks Consensus Estimate by a significant margin in the trailing four quarters, on average.

Nomad Foods (NOMD - Free Report) has a Zacks Rank #2 (Buy) and its bottom line outpaced the Zacks Consensus Estimate by 10.3% in the trailing four quarters, on average.

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