Yahoo Finance Is It Too Late To Consider Buying Medifast, Inc. (NYSE:MED)?
Medifast, Inc. (NYSE:MED), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$195 and falling to the lows of US$159. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Medifast's current trading price of US$167 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Medifast’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Medifast
Is Medifast still cheap?
Medifast appears to be overvalued by 31% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$167 on the market compared to my intrinsic value of $127.38. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Medifast’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Medifast generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by a double-digit 13% in the upcoming year, the short-term outlook is positive for Medifast. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MED’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MED should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, 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 best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for MED, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Medifast at this point in time. For example - Medifast has 2 warning signs we think you should be aware of.
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.
