Is Now An Opportune Moment To Examine Medifast, Inc. (NYSE:MED)?

While Medifast, Inc. (NYSE:MED) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Medifast’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Medifast

What's The Opportunity In Medifast?

According to my valuation model, Medifast seems to be fairly priced at around 14% 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 $115.47, 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.

Can we expect growth from Medifast?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Medifast, at least in the near future.

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 de-risk 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 an eye on MED for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears 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 crystalize your views on MED should the price fluctuate below its true value.

If you want to dive deeper into Medifast, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for Medifast (1 shouldn't be ignored!) and we strongly recommend you look at them before investing.

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.