Intrinsic value of Medifast - MED

Previous Close

$73.40

  Intrinsic Value

$46.11

stock screener

  Rating & Target

sell

-37%

Previous close

$73.40

 
Intrinsic value

$46.11

 
Up/down potential

-37%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MED stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  0.73
  11.60
  10.94
  10.35
  9.81
  9.33
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.86
  6.68
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
  5.65
  5.58
  5.53
  5.47
  5.43
  5.38
  5.35
  5.31
Revenue, $m
  275
  307
  340
  376
  413
  451
  491
  533
  576
  622
  669
  717
  768
  821
  876
  933
  992
  1,054
  1,118
  1,185
  1,255
  1,328
  1,404
  1,483
  1,566
  1,652
  1,743
  1,837
  1,936
  2,040
  2,148
Variable operating expenses, $m
 
  275
  305
  336
  369
  404
  440
  477
  516
  556
  598
  642
  688
  735
  784
  835
  888
  943
  1,001
  1,061
  1,123
  1,188
  1,256
  1,327
  1,401
  1,479
  1,560
  1,644
  1,733
  1,826
  1,923
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  248
  275
  305
  336
  369
  404
  440
  477
  516
  556
  598
  642
  688
  735
  784
  835
  888
  943
  1,001
  1,061
  1,123
  1,188
  1,256
  1,327
  1,401
  1,479
  1,560
  1,644
  1,733
  1,826
  1,923
Operating income, $m
  27
  32
  36
  39
  43
  47
  52
  56
  61
  65
  70
  75
  81
  86
  92
  98
  104
  111
  117
  124
  132
  139
  147
  156
  164
  173
  183
  193
  203
  214
  226
EBITDA, $m
  32
  38
  42
  46
  51
  55
  60
  65
  71
  76
  82
  88
  94
  101
  108
  115
  122
  129
  137
  146
  154
  163
  172
  182
  192
  203
  214
  226
  238
  250
  264
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
Earnings before tax, $m
  27
  32
  36
  39
  43
  47
  51
  55
  60
  64
  69
  74
  79
  85
  90
  96
  102
  108
  115
  122
  129
  136
  144
  152
  161
  169
  179
  188
  198
  209
  220
Tax expense, $m
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  19
  20
  21
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
  41
  43
  46
  48
  51
  54
  56
  59
Net income, $m
  18
  24
  26
  29
  31
  34
  37
  40
  44
  47
  50
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  124
  130
  137
  145
  152
  161

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  77
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  121
  49
  54
  60
  66
  72
  79
  85
  92
  99
  107
  115
  123
  131
  140
  149
  159
  169
  179
  190
  201
  212
  225
  237
  251
  264
  279
  294
  310
  326
  344
Adjusted assets (=assets-cash), $m
  44
  49
  54
  60
  66
  72
  79
  85
  92
  99
  107
  115
  123
  131
  140
  149
  159
  169
  179
  190
  201
  212
  225
  237
  251
  264
  279
  294
  310
  326
  344
Revenue / Adjusted assets
  6.250
  6.265
  6.296
  6.267
  6.258
  6.264
  6.215
  6.271
  6.261
  6.283
  6.252
  6.235
  6.244
  6.267
  6.257
  6.262
  6.239
  6.237
  6.246
  6.237
  6.244
  6.264
  6.240
  6.257
  6.239
  6.258
  6.247
  6.248
  6.245
  6.258
  6.244
Average production assets, $m
  25
  27
  30
  33
  37
  40
  44
  47
  51
  55
  60
  64
  68
  73
  78
  83
  88
  94
  100
  105
  112
  118
  125
  132
  139
  147
  155
  164
  172
  182
  191
Working capital, $m
  77
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total debt, $m
  0
  3
  6
  9
  12
  16
  20
  23
  27
  31
  36
  40
  45
  50
  55
  60
  65
  71
  77
  83
  89
  96
  103
  110
  117
  125
  133
  142
  151
  160
  170
Total liabilities, $m
  25
  28
  31
  34
  37
  41
  45
  48
  52
  56
  61
  65
  70
  75
  80
  85
  90
  96
  102
  108
  114
  121
  128
  135
  142
  150
  158
  167
  176
  185
  195
Total equity, $m
  96
  21
  24
  26
  29
  31
  34
  37
  40
  43
  46
  50
  53
  57
  61
  64
  69
  73
  77
  82
  87
  92
  97
  103
  108
  114
  120
  127
  134
  141
  148
Total liabilities and equity, $m
  121
  49
  55
  60
  66
  72
  79
  85
  92
  99
  107
  115
  123
  132
  141
  149
  159
  169
  179
  190
  201
  213
  225
  238
  250
  264
  278
  294
  310
  326
  343
Debt-to-equity ratio
  0.000
  0.140
  0.250
  0.350
  0.440
  0.510
  0.580
  0.640
  0.690
  0.730
  0.770
  0.810
  0.840
  0.870
  0.900
  0.930
  0.950
  0.970
  0.990
  1.010
  1.030
  1.040
  1.060
  1.070
  1.080
  1.100
  1.110
  1.120
  1.130
  1.140
  1.150
Adjusted equity ratio
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432
  0.432

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  18
  24
  26
  29
  31
  34
  37
  40
  44
  47
  50
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  99
  105
  111
  117
  124
  130
  137
  145
  152
  161
Depreciation, amort., depletion, $m
  5
  5
  6
  7
  7
  8
  9
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  24
  25
  26
  28
  29
  31
  33
  34
  36
  38
Funds from operations, $m
  21
  29
  32
  35
  39
  42
  46
  50
  54
  58
  62
  67
  72
  76
  81
  87
  92
  98
  104
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
Change in working capital, $m
  -4
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  25
  29
  32
  35
  39
  42
  46
  50
  54
  58
  62
  67
  72
  76
  81
  87
  92
  98
  104
  110
  116
  123
  130
  137
  145
  153
  161
  170
  179
  189
  199
Maintenance CAPEX, $m
  0
  -5
  -5
  -6
  -7
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -33
  -34
  -36
New CAPEX, $m
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
Cash from investing activities, $m
  -2
  -8
  -8
  -9
  -10
  -10
  -12
  -13
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -31
  -32
  -33
  -36
  -37
  -39
  -42
  -43
  -46
Free cash flow, $m
  23
  21
  24
  26
  29
  32
  34
  37
  40
  44
  47
  51
  54
  58
  62
  66
  70
  75
  79
  84
  89
  94
  100
  105
  111
  117
  124
  131
  138
  145
  153
Issuance/(repayment) of debt, $m
  0
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
Issuance/(repurchase) of shares, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
Total cash flow (excl. dividends), $m
  22
  24
  27
  29
  32
  35
  38
  41
  44
  48
  51
  55
  59
  63
  67
  71
  76
  80
  85
  90
  95
  101
  107
  113
  119
  125
  132
  139
  147
  155
  163
Retained Cash Flow (-), $m
  -7
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -7
Prev. year cash balance distribution, $m
 
  77
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  99
  24
  27
  30
  32
  35
  38
  41
  45
  48
  52
  55
  59
  63
  67
  72
  76
  81
  86
  91
  96
  101
  107
  113
  119
  126
  133
  140
  147
  155
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  95
  22
  23
  24
  25
  26
  26
  26
  26
  25
  25
  24
  22
  21
  20
  18
  17
  15
  13
  12
  10
  8
  7
  6
  5
  4
  3
  2
  2
  1
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Medifast, Inc. produces, distributes and sells weight loss, weight management, and healthy living products, and other consumable health and nutritional products. The Company’s product lines include weight loss, weight management, and healthy living meal replacements, snacks, hydration products, and vitamins. Its business units include Optavia, Medifast Direct, Franchise Medifast Weight Control Centers (MWCC) and Medifast Wholesale. Optavia is a personal coaching division of the Company that consists of Optavia Coaches, who provides coaching and support to clients utilizing the Optavia platform. Medifast Direct is its direct-to-consumer business unit that allows customers to order Medifast products directly through its Website or its in-house call center. The MWCC business unit sells product through franchise and reseller locations, which offers structured programs and a team of professionals to help customers achieve weight-loss and weight-management success at center locations.

FINANCIAL RATIOS  of  Medifast (MED)

Valuation Ratios
P/E Ratio 48.4
Price to Sales 3.2
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 34.9
Price to Free Cash Flow 39.6
Growth Rates
Sales Growth Rate 0.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -22.9%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 15.2%
Ret/ On Assets - 3 Yr. Avg. 14.3%
Return On Total Capital 19.5%
Ret/ On T. Cap. - 3 Yr. Avg. 19.2%
Return On Equity 19.5%
Return On Equity - 3 Yr. Avg. 19.2%
Asset Turnover 2.3
Profitability Ratios
Gross Margin 74.9%
Gross Margin - 3 Yr. Avg. 74%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 9.8%
Oper. Margin - 3 Yr. Avg. 10.3%
Pre-Tax Margin 9.8%
Pre-Tax Margin - 3 Yr. Avg. 10.7%
Net Profit Margin 6.5%
Net Profit Margin - 3 Yr. Avg. 6.1%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 33.7%
Payout Ratio 66.7%

MED stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MED stock intrinsic value calculation we used $275 million for the last fiscal year's total revenue generated by Medifast. The default revenue input number comes from 2016 income statement of Medifast. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MED stock valuation model: a) initial revenue growth rate of 11.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MED is calculated based on our internal credit rating of Medifast, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Medifast.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MED stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MED stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Medifast.

Corporate tax rate of 27% is the nominal tax rate for Medifast. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MED stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MED are equal to 8.9%.

Life of production assets of 4.9 years is the average useful life of capital assets used in Medifast operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MED is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $96 million for Medifast - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 12.011 million for Medifast is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Medifast at the current share price and the inputted number of shares is $0.9 billion.

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COMPANY NEWS

▶ Medifast posts 3Q profit   [Nov-07-17 06:06PM  Associated Press]
▶ Medifast profit beats estimates as sales rise almost 13 percent   [05:55PM  American City Business Journals]
▶ Medifast, Inc. to Host Earnings Call   [10:30AM  ACCESSWIRE]
▶ ETFs with exposure to Medifast, Inc. : October 30, 2017   [Oct-30-17 12:03PM  Capital Cube]
▶ This Top Growth Stock Near Buy Point With Q3 Earnings Due   [Oct-24-17 04:06PM  Investor's Business Daily]
▶ ETFs with exposure to Medifast, Inc. : October 9, 2017   [Oct-09-17 11:46AM  Capital Cube]
▶ ETFs with exposure to Medifast, Inc. : September 19, 2017   [Sep-19-17 05:58PM  Capital Cube]
▶ Medifast confirms headquarters move to Harbor East   [09:35AM  American City Business Journals]
▶ Medifast, Inc. Announces Quarterly Dividend   [Sep-07-17 04:30PM  PR Newswire]
▶ Stock Indexes Retreat Fast; Medifast Thrusts Higher   [Aug-17-17 12:22PM  Investor's Business Daily]
▶ Medifast posts 2Q profit   [Aug-08-17 10:36PM  Associated Press]
▶ Take Shape For Life® Rebrands to OPTAVIA   [Jul-24-17 08:30AM  PR Newswire]
▶ ETFs with exposure to Medifast, Inc. : July 6, 2017   [Jul-06-17 01:59PM  Capital Cube]
▶ Medifast, Inc. Announces Quarterly Dividend   [Jun-07-17 04:05PM  PR Newswire]
▶ 5 Must See Earnings Charts   [May-23-17 05:55PM  Zacks]
▶ Medifast posts 1Q profit   [May-04-17 06:14PM  Associated Press]
▶ Medifast, Inc. Value Analysis (NYSE:MED) : April 19, 2017   [Apr-19-17 03:09PM  Capital Cube]
▶ Medifast CEO receives nearly $3 million in 2016   [Apr-10-17 12:25PM  American City Business Journals]
▶ Top Ranked Income Stocks to Buy for April 5th   [Apr-05-17 09:06AM  Zacks]
▶ Medifast posts 4Q profit   [06:28PM  Associated Press]
▶ Medifast, Inc. Announces Quarterly Dividend   [Mar-07-17 04:05PM  PR Newswire]
▶ Medifast Inc (MED): Are Hedge Funds Right About This Stock?   [Dec-06-16 11:30AM  at Insider Monkey]
▶ 5 Medical Tech Stocks You Should Be Investing In   [Dec-01-16 11:47AM  at Insider Monkey]
Financial statements of MED
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