Medifast, Inc. (NYSE:MED)

Despite brief rally last year after SEC troubles cleared, stock continues to decline, with analysts proposing that clients are moving toward the Weight Watchers style of weight management.

Based upon historical earnings, I think this stock should be trading around $36.77 using 5 years of discounted cash flows. This yields a safety margin of 62.2%.

This company is in growth mode, and the obesity epidemic will provide some nice tailwinds.

health - 55% yoy R
no div
Total Debt / Equity    0.07
Price Earnings    10.80
Price/Sales    0.88 <<<<<<,
Price/Book    3.34
Price/Cash Flow    8.80

had a big drop this year

I spoke to god and he lovingly recommended this company and its lemon meringue bars.

Obesity isn't going away any time soon, and this company has a track record of successful weight loss.

Expected earnings of $2.11 for 2012 puts the forward P/E at about 11 versus expected 5 year growth of 21.25%. This makes MED's forward PEG about 0.51. Medifast is a small company so it has room to grow and right now it's about 30% below it's 52 wk high. Fast growth, low forward P/E and 30% discount to it's 52 week high is good enough for me. MED should outperform the overall market for the next several years.

One of the only things we can be certain of in this economy is that people across the world are going to get fatter!!!!! The WHO estimated the world would become about 3.5% fatter by a year for the next 4 years. medifast has an 80% sales growth for the past 3 years.

Negative Earnings Surprise

America is fat and this company will help them get thinner. :) I think this one will be up quite a bit sometime over the next year. Don't know that I'd hold for a long time after that.

Its near a 52 week low. Stocks that are at 52-week low generally exhibit poor record of performance in last 3-5 year timeframe. Especially since most recently we hit a high on S&P500 somewhere around mid-2006.

Yet, this stock has shown positive 26% annual return since May 2007, as compared to -30% (negative) for NTRI and only 4-5% positve for WTW. (all numbers are approx). WTW recently hit a 52-week high and sells for much higher P/E

The reason for this outstanding performance is their business hasnt seen a slowdown at all. In 2007, their revenue was 84MM and today it is 238MM. Their operating profits have gone up 5 times during this.

If they continue this kind of performance, today's price will prove to be a better bargain then AAPL at 85 back in the day. I had called AAPL to outperform in March of 2008 at that price. I didnt follow my own advice. I only bought AAPL once it got to 200. I am not waiting for that to happen to MED.

** risk profile of both stocks are quite different. Traditional analysis never allows for a comparison of tech company with a weigh loss and nutrition company. But hey, I am here to find out undervalued investments, not to follow traditional rules.

R industry starts screen

So, i read this article from forbes magazine about the 100 best small companies of 2010 and thought it was a nice idea to put them together in a portfolio and keep an eye on whats going to happen. This one, Medifast, was their nr 1, don't ask me why. For some odd reason i could not put vse [vsec] on the list so i'm down to 99. I hope some of you can use this list for 'something'.

cheers

MLM (Multi Level Marketing) makes my stomach turn. Listen to the latest CC. The wells fargo analyst commentary seemed almost fake. Good luck with this quasi ponzi scheme if you are long.

The product works, the market is huge, revenue is increasing at a rate to double every 1.5 years. Sooner or later the market will notice.

http://seekingalpha.com/article/236454-20-profitable-stocks-with-low-peg-ratios?source=TheMotleyFool
3. Medifast Inc. (MED): Specialty Retail Industry. Market cap of $360.3M. PEG ratio at 0.73. EPS has grown by 42.27% over the past 5 years, with EPS growth projected at 25.00% over the next 5 years. Sales have grown by 43.37% over the past 5 years. Short float at 17.74%, which implies a short ratio of 7.45 days. The stock has lost -12.37% over the last year.

Stock screen results. Using ROE, PE, LT debt/Equity, Current Ratio.

Low profit margin (7%) belies the 10 years of excellent ROE, EPS, and sales growth. The diet industry is a safe bet in America, where people are getting fatter while image still rules TV, movies, and even influences success. Plenty of desperate customers to flock to any successful diet products.