) posted robust second-quarter 2012 results, including earnings per
share that improved 14.6% year over year to clinch a 27% positive
Subsequently, shares of this manufacturer and provider of
weight-loss products attained a new 52-week high of $27.34 on July
30 and became a Zacks #1 Rank (Strong Buy) on July 28.
Fabulous Quarter, Upbeat Guidance
On July 26, Medifast reported second quarter earnings of 47 cents
per share, topping the Zacks Consensus Estimate of 37 cents and
increasing from 41 cents in the prior-year quarter. The improvement
was made possible by strategic initiatives from management to
contain costs and enhance operational efficiencies across sales
Net sales of $93.6 million comfortably surpassed the Zacks
Consensus Estimate of $89 million, and grew 20% year over year,
mirroring sales increases across Take Shape for Life (up 13%),
Medifast Direct (up 17%), and Medifast Weight Control Center and
Wholesale Physicians (up 59%). Operating margin expanded 200 basis
points sequentially to 8.9%.
Management now expects third quarter sales between $88 million and
$91 million, reflecting year-over-year growth of 16% to 20%.
Earnings are projected between 37 cents and 40 cents per share.
Earnings Momentum on the Rise
Over the past 7 days, the Zacks Consensus Estimate for 2012 rose
4.9% to $1.29 per share on the back of upward revisions from 2 of 5
estimates. For 2013, three of 5 estimates were revised higher over
the same timeframe, eventually driving the Zacks Consensus Estimate
up by 7.9% to $1.63 per share.
Valuation Reflects Fundamental Strength
Medifast currently trades at a forward P/E of 20.7x, reflecting an
8.1% premium to the peer group average of 19.2x. Also, on a
price-to-book basis, shares trade at 5.2x, a substantial premium to
the peer group average of 1.3x. Given the company's compelling
fundamentals, the premium valuation is justified and well supported
by its long-term estimated EPS growth rate of 17.5%.
With respect to return on equity (ROE), the stock looks very
attractive. It has a trailing 12-month ROE of 23.2%, which is above
its peer group average of 12%. This implies that the company
reinvests its earnings more efficiently than its peers.
Chart Echoing Strength
Shares of Medifast had been trading in the range of approximately
$15.00 to $21.00 since the beginning of the year. It broke that
range on July 27, when shares soared 26.5% on
stronger-than-anticipated second quarter results and moved closer
to its 52-week high. The stock has been consistently trading above
its 200-day moving average since March 23, 2012. It has also
remained above the 50-day moving average since June 12, 2012.
Volume is fairly strong, averaging roughly 229K daily. Medifast,
which competes with Herbalife Ltd. (
) and Weight Watchers International Inc. (
), has outperformed the S&P 500 since the beginning of 2012.
The year-to-date return for the stock is 79.2% compared with the
S&P 500's return of 8.5%.
Founded in 1980 and headquartered in Owings Mills, Maryland,
Medifast manufactures, distributes, and sells weight management and
disease management products, and other health related and diet
products in the U.S. The company has a current market cap of $415
MEDIFAST INC (MED): Free Stock Analysis Report
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