Analysts Are More Bearish On Medifast, Inc. (NYSE:MED) Than They Used To Be
One thing we could say about the analysts on Medifast, Inc. (NYSE:MED) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the latest downgrade, the twin analysts covering Medifast provided consensus estimates of US$694m revenue in 2024, which would reflect a painful 35% decline on its sales over the past 12 months. Statutory earnings per share are supposed to plunge 79% to US$1.91 in the same period. Before this latest update, the analysts had been forecasting revenues of US$820m and earnings per share (EPS) of US$5.04 in 2024. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
See our latest analysis for Medifast
It'll come as no surprise then, to learn that the analysts have cut their price target 40% to US$37.50.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 35% by the end of 2024. This indicates a significant reduction from annual growth of 19% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.1% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Medifast is expected to lag the wider industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Medifast. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Medifast's revenues are expected to grow slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Medifast.
Uncomfortably, our automated valuation tool also suggests that Medifast stock could be overvalued following the downgrade. Shareholders could be left disappointed if these estimates play out. You can learn more about our valuation methodology for free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
