One Medifast, Inc. (NYSE:MED) Analyst Just Made A Major Cut To Next Year's Estimates

One thing we could say about the covering analyst on Medifast, Inc. (NYSE:MED) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the single analyst covering Medifast, is for revenues of US$1.6b in 2023, which would reflect a noticeable 2.4% reduction in Medifast's sales over the past 12 months. Statutory earnings per share are anticipated to reduce 4.6% to US$13.26 in the same period. Previously, the analyst had been modelling revenues of US$1.8b and earnings per share (EPS) of US$15.46 in 2023. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a real cut to earnings per share numbers as well.

Our analysis indicates that MED is potentially undervalued!

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Medifast's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 1.9% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 34% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 8.7% annually for the foreseeable future. It's pretty clear that Medifast's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that the analyst has reduced their earnings per share estimates, suggesting business headwinds lay ahead for Medifast. Unfortunately the analyst also downgraded their revenue estimates, and industry data suggests that Medifast's revenues are expected to grow slower than the wider market. We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like the analyst has become a lot more bearish on Medifast, and their negativity could be grounds for caution.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Medifast's business, like concerns around earnings quality. Learn more, and discover the 1 other flag we've identified, for free on our platform here.

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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.