At US$117, Is Medifast, Inc. (NYSE:MED) Worth Looking At Closely?

While Medifast, Inc. (NYSE:MED) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Medifast’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Medifast

Is Medifast Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 0.7% below my intrinsic value, which means if you buy Medifast today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $117.41, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Medifast’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Medifast look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -3.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Medifast. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? MED seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on MED for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MED should the price fluctuate below its true value.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Medifast (2 are significant) you should be familiar with.

If you are no longer interested in Medifast, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.