It's been a sad week for Medifast, Inc. (NYSE:MED), who've watched their investment drop 11% to US$85.82 in the week since the company reported its yearly result. Revenues were US$714m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$6.43 were also better than expected, beating analyst predictions by 10%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Following last week's earnings report, Medifast's dual analysts are forecasting 2020 revenues to be US$720.9m, approximately in line with the last 12 months. Statutory earnings per share are forecast to shrink 5.2% to US$6.28 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$798.9m and earnings per share (EPS) of US$6.84 in 2020. Analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.
It'll come as no surprise then, to learn that analysts have cut their price target 33% to US$86.50.
In addition, we can look to Medifast's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Medifast's revenue growth will slow down substantially, with revenues next year expected to grow 1.0%, compared to a historical growth rate of 22% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 6.5% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Medifast.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Medifast. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Medifast. Long-term earnings power is much more important than next year's profits. At least one analyst has provided forecasts out to 2021, which can be seen for free on our platform here.
We also provide an overview of the Medifast Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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