Intrinsic value of MEDIFAST INC - MED

Previous Close

$145.52

  Intrinsic Value

$1,633

stock screener

  Rating & Target

str. buy

+999%

Previous close

$145.52

 
Intrinsic value

$1,633

 
Up/down potential

+999%

 
Rating

str. buy

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

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  802
  1,238
  1,852
  2,687
  3,791
  5,212
  6,997
  9,187
  11,821
  14,931
  18,541
  22,669
  27,323
  32,509
  38,225
  44,465
  51,220
  58,479
  66,230
  74,463
  83,165
  92,328
  101,945
  112,012
  122,527
  133,491
  144,909
  156,789
  169,142
  181,980
Variable operating expenses, $m
  683
  1,055
  1,578
  2,290
  3,230
  4,441
  5,961
  7,827
  10,072
  12,721
  15,797
  19,314
  23,279
  27,698
  32,568
  37,884
  43,639
  49,824
  56,428
  63,442
  70,857
  78,664
  86,857
  95,434
  104,393
  113,734
  123,463
  133,584
  144,109
  155,047
Fixed operating expenses, $m
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
  8
  8
  8
  8
  9
  9
  9
  9
  9
  10
Total operating expenses, $m
  688
  1,060
  1,583
  2,295
  3,236
  4,447
  5,967
  7,833
  10,078
  12,727
  15,803
  19,320
  23,286
  27,705
  32,575
  37,891
  43,646
  49,831
  56,436
  63,450
  70,865
  78,672
  86,865
  95,442
  104,402
  113,743
  123,472
  133,593
  144,118
  155,057
Operating income, $m
  114
  178
  269
  392
  556
  766
  1,030
  1,354
  1,743
  2,204
  2,738
  3,348
  4,037
  4,805
  5,650
  6,574
  7,573
  8,647
  9,795
  11,013
  12,301
  13,656
  15,080
  16,569
  18,125
  19,748
  21,438
  23,196
  25,024
  26,923
EBITDA, $m
  120
  187
  283
  413
  584
  805
  1,083
  1,424
  1,833
  2,317
  2,879
  3,521
  4,245
  5,052
  5,941
  6,912
  7,963
  9,092
  10,298
  11,579
  12,933
  14,358
  15,854
  17,421
  19,057
  20,762
  22,539
  24,387
  26,309
  28,307
Interest expense (income), $m
  0
  0
  2
  5
  9
  14
  21
  31
  42
  57
  74
  94
  117
  144
  175
  208
  245
  286
  330
  377
  428
  481
  538
  598
  660
  726
  794
  865
  940
  1,017
  1,097
Earnings before tax, $m
  114
  176
  264
  383
  541
  744
  999
  1,311
  1,687
  2,130
  2,644
  3,231
  3,893
  4,630
  5,442
  6,328
  7,287
  8,317
  9,417
  10,585
  11,819
  13,119
  14,482
  15,909
  17,400
  18,954
  20,572
  22,256
  24,007
  25,826
Tax expense, $m
  31
  48
  71
  104
  146
  201
  270
  354
  455
  575
  714
  872
  1,051
  1,250
  1,469
  1,709
  1,968
  2,246
  2,543
  2,858
  3,191
  3,542
  3,910
  4,295
  4,698
  5,118
  5,554
  6,009
  6,482
  6,973
Net income, $m
  83
  129
  193
  280
  395
  543
  729
  957
  1,231
  1,555
  1,930
  2,359
  2,842
  3,380
  3,973
  4,620
  5,320
  6,072
  6,875
  7,727
  8,628
  9,577
  10,572
  11,614
  12,702
  13,836
  15,018
  16,247
  17,525
  18,853

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  206
  318
  476
  690
  974
  1,339
  1,798
  2,360
  3,037
  3,836
  4,764
  5,824
  7,020
  8,353
  9,821
  11,425
  13,160
  15,025
  17,017
  19,132
  21,368
  23,723
  26,194
  28,780
  31,482
  34,299
  37,233
  40,285
  43,459
  46,758
Adjusted assets (=assets-cash), $m
  206
  318
  476
  690
  974
  1,339
  1,798
  2,360
  3,037
  3,836
  4,764
  5,824
  7,020
  8,353
  9,821
  11,425
  13,160
  15,025
  17,017
  19,132
  21,368
  23,723
  26,194
  28,780
  31,482
  34,299
  37,233
  40,285
  43,459
  46,758
Revenue / Adjusted assets
  3.893
  3.893
  3.891
  3.894
  3.892
  3.892
  3.892
  3.893
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
  3.892
Average production assets, $m
  30
  47
  70
  102
  144
  198
  266
  349
  449
  567
  705
  861
  1,038
  1,235
  1,453
  1,690
  1,946
  2,222
  2,517
  2,830
  3,160
  3,508
  3,874
  4,256
  4,656
  5,073
  5,507
  5,958
  6,427
  6,915
Working capital, $m
  -26
  -40
  -59
  -86
  -121
  -167
  -224
  -294
  -378
  -478
  -593
  -725
  -874
  -1,040
  -1,223
  -1,423
  -1,639
  -1,871
  -2,119
  -2,383
  -2,661
  -2,954
  -3,262
  -3,584
  -3,921
  -4,272
  -4,637
  -5,017
  -5,413
  -5,823
Total debt, $m
  36
  89
  163
  264
  397
  568
  783
  1,047
  1,364
  1,739
  2,174
  2,671
  3,232
  3,857
  4,546
  5,298
  6,112
  6,987
  7,921
  8,913
  9,961
  11,066
  12,224
  13,438
  14,705
  16,026
  17,402
  18,833
  20,322
  21,869
Total liabilities, $m
  97
  149
  223
  324
  457
  628
  843
  1,107
  1,425
  1,799
  2,234
  2,732
  3,293
  3,917
  4,606
  5,358
  6,172
  7,047
  7,981
  8,973
  10,022
  11,126
  12,285
  13,498
  14,765
  16,086
  17,462
  18,894
  20,382
  21,929
Total equity, $m
  109
  169
  253
  367
  517
  711
  955
  1,253
  1,613
  2,037
  2,530
  3,093
  3,728
  4,435
  5,215
  6,067
  6,988
  7,978
  9,036
  10,159
  11,347
  12,597
  13,909
  15,282
  16,717
  18,213
  19,770
  21,391
  23,077
  24,828
Total liabilities and equity, $m
  206
  318
  476
  691
  974
  1,339
  1,798
  2,360
  3,038
  3,836
  4,764
  5,825
  7,021
  8,352
  9,821
  11,425
  13,160
  15,025
  17,017
  19,132
  21,369
  23,723
  26,194
  28,780
  31,482
  34,299
  37,232
  40,285
  43,459
  46,757
Debt-to-equity ratio
  0.330
  0.530
  0.640
  0.720
  0.770
  0.800
  0.820
  0.840
  0.850
  0.850
  0.860
  0.860
  0.870
  0.870
  0.870
  0.870
  0.870
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
  0.880
Adjusted equity ratio
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531
  0.531

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  83
  129
  193
  280
  395
  543
  729
  957
  1,231
  1,555
  1,930
  2,359
  2,842
  3,380
  3,973
  4,620
  5,320
  6,072
  6,875
  7,727
  8,628
  9,577
  10,572
  11,614
  12,702
  13,836
  15,018
  16,247
  17,525
  18,853
Depreciation, amort., depletion, $m
  6
  9
  14
  20
  29
  40
  53
  70
  90
  113
  141
  172
  208
  247
  291
  338
  389
  444
  503
  566
  632
  702
  775
  851
  931
  1,015
  1,101
  1,192
  1,285
  1,383
Funds from operations, $m
  89
  138
  207
  300
  424
  583
  782
  1,027
  1,321
  1,668
  2,071
  2,531
  3,050
  3,627
  4,263
  4,958
  5,709
  6,516
  7,378
  8,293
  9,260
  10,278
  11,347
  12,465
  13,633
  14,851
  16,119
  17,438
  18,810
  20,236
Change in working capital, $m
  -10
  -14
  -20
  -27
  -35
  -45
  -57
  -70
  -84
  -100
  -116
  -132
  -149
  -166
  -183
  -200
  -216
  -232
  -248
  -263
  -278
  -293
  -308
  -322
  -336
  -351
  -365
  -380
  -395
  -411
Cash from operations, $m
  99
  152
  226
  327
  459
  628
  840
  1,097
  1,406
  1,768
  2,186
  2,663
  3,198
  3,793
  4,446
  5,157
  5,925
  6,748
  7,626
  8,556
  9,539
  10,571
  11,654
  12,787
  13,969
  15,202
  16,484
  17,819
  19,206
  20,647
Maintenance CAPEX, $m
  -4
  -6
  -9
  -14
  -20
  -29
  -40
  -53
  -70
  -90
  -113
  -141
  -172
  -208
  -247
  -291
  -338
  -389
  -444
  -503
  -566
  -632
  -702
  -775
  -851
  -931
  -1,015
  -1,101
  -1,192
  -1,285
New CAPEX, $m
  -11
  -17
  -23
  -32
  -42
  -54
  -68
  -83
  -100
  -118
  -137
  -157
  -177
  -197
  -217
  -237
  -257
  -276
  -295
  -313
  -331
  -348
  -365
  -383
  -400
  -417
  -434
  -451
  -469
  -488
Cash from investing activities, $m
  -15
  -23
  -32
  -46
  -62
  -83
  -108
  -136
  -170
  -208
  -250
  -298
  -349
  -405
  -464
  -528
  -595
  -665
  -739
  -816
  -897
  -980
  -1,067
  -1,158
  -1,251
  -1,348
  -1,449
  -1,552
  -1,661
  -1,773
Free cash flow, $m
  83
  129
  194
  281
  397
  546
  732
  961
  1,236
  1,560
  1,936
  2,365
  2,849
  3,388
  3,982
  4,630
  5,330
  6,083
  6,887
  7,740
  8,642
  9,591
  10,587
  11,630
  12,719
  13,854
  15,036
  16,266
  17,545
  18,874
Issuance/(repayment) of debt, $m
  36
  53
  74
  101
  133
  171
  215
  264
  317
  375
  435
  497
  561
  625
  689
  752
  814
  875
  934
  992
  1,049
  1,104
  1,159
  1,213
  1,267
  1,321
  1,376
  1,432
  1,489
  1,547
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  36
  53
  74
  101
  133
  171
  215
  264
  317
  375
  435
  497
  561
  625
  689
  752
  814
  875
  934
  992
  1,049
  1,104
  1,159
  1,213
  1,267
  1,321
  1,376
  1,432
  1,489
  1,547
Total cash flow (excl. dividends), $m
  119
  182
  268
  382
  530
  717
  947
  1,225
  1,553
  1,935
  2,371
  2,863
  3,410
  4,013
  4,671
  5,382
  6,144
  6,958
  7,821
  8,732
  9,691
  10,695
  11,746
  12,843
  13,986
  15,175
  16,412
  17,697
  19,033
  20,421
Retained Cash Flow (-), $m
  -41
  -60
  -84
  -114
  -151
  -194
  -243
  -299
  -359
  -424
  -493
  -563
  -635
  -708
  -780
  -851
  -922
  -990
  -1,058
  -1,123
  -1,187
  -1,250
  -1,312
  -1,373
  -1,435
  -1,496
  -1,558
  -1,621
  -1,685
  -1,752
Prev. year cash balance distribution, $m
  41
  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
  119
  122
  184
  268
  379
  523
  704
  926
  1,194
  1,510
  1,878
  2,300
  2,775
  3,306
  3,891
  4,530
  5,223
  5,968
  6,764
  7,609
  8,503
  9,445
  10,434
  11,469
  12,551
  13,679
  14,854
  16,077
  17,348
  18,669
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
  115
  112
  160
  221
  294
  380
  475
  579
  686
  792
  892
  981
  1,055
  1,110
  1,142
  1,151
  1,136
  1,099
  1,041
  967
  880
  784
  684
  584
  488
  399
  319
  249
  189
  141
Current shareholders' claim on cash, %
  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 INC (MED)

Valuation Ratios
P/E Ratio 96
Price to Sales 6.3
Price to Book 18
Price to Tangible Book
Price to Cash Flow 69.1
Price to Free Cash Flow 78.5
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 $501 million for the last fiscal year's total revenue generated by MEDIFAST INC. The default revenue input number comes from 0001 income statement of MEDIFAST INC. 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 60% 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 INC, 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 INC.
    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 85.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $5 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 5.4% for MEDIFAST INC.

Corporate tax rate of 27% is the nominal tax rate for MEDIFAST INC. 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 3.8%.

Life of production assets of 4.3 years is the average useful life of capital assets used in MEDIFAST INC 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 -3.2%. 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 - $109.106 million for MEDIFAST INC - 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 11.885 million for MEDIFAST INC 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 INC at the current share price and the inputted number of shares is $1.7 billion.

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