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Wellness company Medifast (NYSE:MED) beat Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 37.7% year on year to $119 million. On the other hand, next quarter’s revenue guidance of $110 million was less impressive, coming in 15.9% below analysts’ estimates. Its GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.

Is now the time to buy Medifast? Find out in our full research report.

Medifast (MED) Q4 CY2024 Highlights:

• Revenue: $119 million vs analyst estimates of $114.3 million (37.7% year-on-year decline, 4.2% beat)

• EPS (GAAP): $0.07 vs analyst estimates of -$0.16 (significant beat)

• Revenue Guidance for Q1 CY2025 is $110 million at the midpoint, below analyst estimates of $130.8 million

• EPS (GAAP) guidance for Q1 CY2025 is -$0.25 at the midpoint, missing analyst estimates by 31.6%

• Operating Margin: 0.6%, down from 4.5% in the same quarter last year

• Market Capitalization: $160 million

“This past year was a pivotal year for Medifast, as we continued to transform our business to meet the changing nature of a health and wellness market that has been revolutionized by the rising acceptance of GLP-1 medications,” said Dan Chard, Chairman & CEO.

Company Overview

Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE:MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.

Personal Care

While personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering. Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $602.5 million in revenue over the past 12 months, Medifast is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, Medifast’s revenue declined by 26.6% per year over the last three years, showing demand was weak. This is a tough starting point for our analysis.

This quarter, Medifast’s revenue fell by 37.7% year on year to $119 million but beat Wall Street’s estimates by 4.2%. Company management is currently guiding for a 37% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 15.4% over the next 12 months. While this projection is better than its three-year trend, it's tough to feel optimistic about a company facing demand difficulties.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Medifast has shown robust cash profitability, driven by its attractive business model that enables it to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.6% over the last two years, quite impressive for a consumer staples business.

Key Takeaways from Medifast’s Q4 Results

We were impressed by how significantly Medifast blew past analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter missed significantly and its EPS guidance for next quarter fell short of Wall Street’s estimates. This outlook could weigh on shares once they trade with more volume. For now, the stock remained flat at $16.10 immediately after reporting.

Is Medifast an attractive investment opportunity at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.