Back to top

Anatomy of Success: Medifast Inc. (MED)

Read MoreHide Full Article

The Zacks Rank methodology is a great way to identify the best companies to invest in, and is a useful tool for beginner and more experienced investors alike; it discovers companies both big and small that have the right characteristics to produce superior gains.

When a company earns that coveted Zacks Rank #1 (Strong Buy) title, its means they have a high probability of outperforming the market over the next one to three months. But, achieving this high rank is not an easy thing to do, as only 5% of companies within the Zacks Rank universe earn this position.

Below, we highlight a stock that is currently a standout in an underperforming industry, and by following our ranking system, investors could have realized major gains.

Medifast (MED - Free Report)

Based in Baltimore, MD, Medifast is a leading manufacturer, distributor, and seller of healthy living products and programs through websites, telemarketing, multi-level marketing, franchised weight loss clinics, and medical professionals. One of its exclusive brands is OPTAVIA, which is sold through a community of independent coaches who offer support and guidance to clients.

The first time MED was added the #1 (Strong Buy) list was early March after posting strong results for its fourth quarter fiscal 2017 report. Both earnings and revenues beat the Zacks Consensus Estimate, with net income and revenues increasing 25% and 78% year-over-year, respectively. OPTAVIA sales grew 32.4% from the prior year to $68.6 million, marking the ninth consecutive quarter of growth. Additionally, the total number of active earning OPTAVIA Coaches hit 15,000, while revenue per active earning Coach increased 9.7% to $4,562 compared to $4,158 for the fourth quarter last year. Shares of MED closed at $88.96 that trading day.

MED maintained its initial Strong Buy run until almost the end of July. During that time, the company also reported solid Q1 2018 earnings in May, where its EPS and sales surpassed our consensus estimate and grew 40% and 98% from the prior year period, respectively. Those results no doubt helped MED remain a #1 (Strong Buy), and about three months after first becoming a top-ranked stock, shares were up 43.4% to $127.55.

The stock was added to the #1 list again after reporting impressive Q2 results on August 10. Earnings of $1.16 per share easily beat the Zacks Consensus of $1.00 per share, and revenues of $117 million also topped our estimate. The top and bottom line increased 55% and 84%, respectively. Medifast noted that the number of active earning OPTAVIA Coaches reached 19,700, a rise of 45.9% year-over-year. Operating income improved $5.8 million to $17.1 million as a result of increased gross profit, partially offset by surging SG&A expenses. As a result, Medifast raised its fiscal year 2018 outlook. Six months after becoming a #1 pick, the company’s stock price was up 130% to $204.69 per share.

Medifast still remains a #1 (Strong Buy) on the Zacks Rank, and has gained more than 300% over the past one-year period.

This table shows the price performance of MED (in red), as well as the 12-month forward looking EPS estimate (in green) from the time the stock first earned a Zacks Rank #1 (Strong Buy). During this stretch, MED never moved lower than a Zacks Rank #3 (Hold).

 

By utilizing the Zacks Rank, investors are able to easily identify elite stocks that are best positioned to beat the market on a consistent basis, and how to hold those top stocks as they continue to grow.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius. Click for details >>




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


MEDIFAST INC (MED) - free report >>

More from Zacks Anatomy of Success

You May Like