Medifast: Right Time, Right Place

10/10/2003 12:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

Few would deny that weight loss is a "growth" industry. Tobin Smith notes that Americans will spend up to $26 billion on meal replacement products in 2003." Ian Wyatt also sees opportunity in this market. Both advisors recommend purchase of Medifast, a leader in weight loss products. Here are their reviews.

"Medifast (MED NYSE) has ‘growth stock’ written all over it," says Ian Wyatt in his The Growth Report. "The firm develops, manufactures, and distributes high quality weight and disease management, sports nutrition, and other consumable health products. It sells its products through a network of physicians, qualified medical practitioners, or a lifestyles program supporting primary care physicians. Medifast still remains largely unknown, in our opinion. Institutional ownership is nil at this point, and there is almost no analyst coverage. We believe it is only a matter of time before more individuals and institutions catch wind of the company’s story and begin buying up shares. Although the numbers are still un-audited, Medifast announced that revenues for the year and quarter soared 125% and 126%, respectively. Given the company’s magnificent growth history and the bright future we see, we are reiterating coverage of Medifast with a buy rating and a 12-month share price target of $19."

Tobin Smith, editor of ChangeWave Investing, adds, "Medifast  is one of the best pure plays on weight loss out there. The company is increasing its exposure with TV spots and an distribution deal. The recent addition of a women's health product line shows the company is willing to use stock to roll up small niche companies and improve their distribution and margins. MED also has a juvenile weight loss line, which got off to a great start and should impact the top line and bottom line in the first quarter of 2004. I think Medifast is one of the cheapest 100% potential growers in the stock world. My valuation model assumes 60% annualized growth over next 36 months--very conservative for a breakout product line driven by direct consumer advertising. Medifast is in the right place at the right time to double its sales and valuation over the next 12-18 months. We'll use the recent pullback from its highs  to add MED to our aggressive growth portfolio. Buy under $15."

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