It goes without saying that the food industry has been suffering from lower sales owing to the changing eating pattern of consumers and their preference for healthy, fresh and organic food products.
That said, overlooking the industry will not be prudent as there are several companies with a decent performance history and strong fundamentals, signaling at a profitable investment opportunity. After all, year-end seasonal factors will continue to drive stocks higher.
Medifast, Inc. MED is one such company that continues to show strength in a number of areas. Therefore, adding the stock to your portfolio should not be a disappointment. Shares of Medifast have surged more than 73% so far this year, against the industry’s loss of 5.2%. Also, the company outperformed the industry in all the other time frames we considered – 4-week, 12-week and 52-week.
Moreover, earnings estimates have moved north in the last few weeks reflecting investor’s optimism on Medifast. Over the last 60 days, the Zacks Consensus Estimate for fourth-quarter and full-year 2017 earnings increased 2.1% and 2.4%, respectively. Also, earnings estimate for 2018 have increased 4% in the same time frame. This bullish analysts’ sentiment justifies the company’s Zacks Rank #2 (Buy) and why we are expecting it to outperform in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, this leading manufacturer and distributor of clinically proven healthy living products and programs show strengths in several key areas as well.
What Makes Medifast a Solid Bet
Strong Growth Initiatives and Upbeat Guidance: Medifast remains focused on growing the direct selling revenues, OPTAVIA business unit and IT systems.
Medifast’s solid financial performance in the last reported quarter reflects early success of its strategic growth initiatives. The company has also achieved its record number of quarterly active OPTAVIA coaches along with the highest quarterly revenue for its OPTAVIA business unit in the same period. It believes that the company is well positioned for future growth and value creation for its shareholders backed by its positive business momentum combined with scalable infrastructure and strong balance sheet.
For 2017, Medifast raised its earnings guidance following an impressive result in the first three quarters of the year. The company now expects the bottom line to be in the range of $2.15-$2.18 per share (up 13% to 15% year over year) compared with $2.05-$2.15 per share, projected earlier.
Impressive Expected Earnings & Revenue Growth: The company’s earnings for 2017 are expected to increase 14.8% year over year, comfortably outpacing the industry’s average projected growth of 6.9%. Meanwhile, Medifast’s projected sales growth is a healthy 8.1%, higher than the industry average of 1.3%, thereby making it a great pick in terms of growth investment.
In the next year, the company’s EPS growth is expected to increase 19.8% on 13.8% growth in revenues.
Higher Return on Equity & Low Beta: Medifast’s trailing 12-month return on equity (ROE) supports its growth potential. ROE in the trailing 12 months is 24.1% while the industry gained 12%, reflecting the company’s efficient usage of shareholders’ funds.
Again, a stock with beta less than 1 suggests that the price movement of the stock is not highly correlated with the market. Since they are less volatile than the market, they are safer bets at the moment. Medifast has an impressive beta of 0.51. Adding it to your portfolio brings down your portfolio’s overall beta, thereby reducing its risk.
Solid VGM Score: Medifast has a VGM Score of B. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of A or B when combined with a Zacks Rank #1 or 2 make solid investment choices.
Other Stocks to Consider
You can consider a few other top-ranked stocks in the same space.
Conagra Brands Inc.CAG carries a Zack Rank #2. Its earnings are expected to grow 9.2% this year and 8.7% in the next.
Nomad Foods Ltd. NOMD, a Zack Rank #2 stock, is expected to witness 22.8% growth in earnings this year and 18.1% for the next.
United Natural Foods, Inc. UNFI also carries a Zacks Rank #2. Its earnings are expected to grow 6.8% this year and 7.3% in the next.
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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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