Shareholders in Medifast, Inc. (NYSE:MED) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with the analysts modelling a real improvement in business performance. The market may be pricing in some blue sky too, with the share price gaining 23% to US$278 in the last 7 days. Could this upgrade be enough to drive the stock even higher?
Following the upgrade, the latest consensus from Medifast's three analysts is for revenues of US$1.4b in 2021, which would reflect a huge 32% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to soar 28% to US$13.62. Before this latest update, the analysts had been forecasting revenues of US$1.2b and earnings per share (EPS) of US$10.89 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
It will come as no surprise to learn that the analysts have increased their price target for Medifast 20% to US$363 on the back of these upgrades. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Medifast analyst has a price target of US$400 per share, while the most pessimistic values it at US$295. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that the analysts have a clear view on its prospects.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Medifast's rate of growth is expected to accelerate meaningfully, with the forecast 44% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 31% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 11% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Medifast is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Medifast could be worth investigating further.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Medifast analysts - going out to 2022, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. 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.
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