Now, when I say Medifast (NYSE:MED) is gaining while its customers are losing, that’s a good thing. You see, MED stock is a weight loss management company.
And MED stock is up a whopping 232% year to date and 310% in the past 12 months. That trounces its biggest publicly traded competitors, Weight Watchers International (NYSE:WTW) and Nutrisystem Inc (NASDAQ:NTRI). As a matter of fact, NTRI is in the red for both those periods and MED has outperformed WTW by more than fourfold.
And this isn’t because Medifast stock is some lightweight taking on the heavyweights. Sure, it’s easy for a small firm with a small market cap to double its business and its stock price. But MED has a $2.8 billion market cap, putting it right between Nutrisystem (about $1 billion) and Weight Watchers (about $4.7 billion).
And the thing is, Medifast stock still isn’t widely traded, even after its monster move. WTW trades about 1.7 million shares a day. MED trades a mere 216,000.
This is what is so intriguing about the stock — it is a significant outperformer in the sector and has a sizable market cap, yet no one seems to be interested in grabbing it.
Quite honestly, this is the best of all worlds since it means that most of the institutional money in it is happy to sit on the stock rather than trade it wildly. And individual investors likely don’t know about it, so they look to the bigger names in the sector.
Why Has Medifast Stock Stayed Off the Radar?
Some of its “under-the-radar” existence may be because it came more from the medical side of the business than the consumer side. Developed by a physician in 1980, it focused on low glycemic index diets and was originally distributed through doctors who then sold them to patients.
That model was the basis for its current diversified sales network that includes it website, multi-level marketing, franchised weight loss clinics and physicians. Its newest line, OPTAVIA uses weight loss coaches (former or current customers) who work with individuals to help them use the plans successfully. The coaches also get a commission on the products that they sell to their customers.
While its sales approach is more similar to organizations like Avon, Amway or Herbalife, there’s little controversy about its practices. In 2010, Forbes magazine ranked it No. 1 in its list of America’s Best 100 Small Companies. In 2016 and 2017, MED made Forbes 100 Most Trustworthy Companies in America.
As for its performance, it speaks for itself. It Q2 numbers were reported in early August: 55% revenue increase year over year; 46% increase in active coaches for its leading OPTAVIA brand; 86% rise in net income; and an 84% increase in earning per diluted share.
This kind of performance establishes MED as a real player in this sector. Don’t wait for everyone else to figure this out.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.