posted
MED got put on **********.com, and you know what's next after that! June 22, 2006
********** Reports on Medifast
The Real “Skinny” on Medifast (AMEX:MED)
BREAKING NEWS: Just today, the EU approved Drug Giant’s Sanofi-Aventis’s new blockbuster pill for obesity, Acomplia. US Approval is expected in upcoming months and the pill we be available on the internet for consumers within months. This goes directly against Medifast, whose primary diets fight obesity.
What Would Americans rather do? Eat prepackaged chili and soup or take a pill??? Cmon, we are Americans, we love shortcuts. It is the opinion of ********** that this will definitely hurt Q4 06 numbers for MED and will spill over to all future business.
Medifast has become a darling of the market over the past 6 month, but it seems like investors should be looking beyond the headlines and get the real “skinny” on Medifast. It is the opinion of **********, that Medifast has become grossly overvalued as they have not returned as much money to shareholders as they have to insiders.
Valuation
On Monday of this week, Nestle announced their purchase of Jenny Craig for $600 million.
We read that Jenny Craig had ttm sales of $400+ million and double digit organic growth. This acquisition puts a hard number on a valuation that could be given to the diet stocks. Based on that valuation, let us look at Medifast. Medifast’s own estimates have it doing a top line business of $68 million for 2006.
That would give it an estimated buyout value of around $100 million or $7.50 a share, and that is based on the company’s raised guidance. And now with the threat of Acomplia, the future valuation of an obese diet plan is even more in question.
Why Medifast is no Nutrisystems
Shareholders of Medifast might get punchdrunk with market euphoria and believe that it could be the next Nutrisystems. Well, ********** has done some basic analysis on MED vs. NTRI that you will find quite interesting. What bothers ********** about Medifast is that despite the growth of the company and its revenues it does not seem to be spilling over to the shareholders. Let us compare Medifast with market darling Nutrisystems for some benchmarks.
From the quarter ending March 31, 2006 compared to prior ending December 31, 2005 shareholder equity in Medifast has increased from $22 million to $23.7 million. This is an increase of less than 10 percent. Yet, the stock price has increased from $5 to over $20.
From year end 2003 to 2005, Medifast’s shareholder equity went from $24 million to $22 million. WHERE IS THE REAL GROWTH???
Compare this to Nutrisystems which showed shareholder equity of $147 million as of last q – up from just $12.1 million at the end of 2003 … now that is growth.
Insider Selling
In the past few months, Medifast’s CEO/Chairman and his wife, the MacDonalds, have sold a total of $3.7 million in stock, which represents close to 25% of their total holdings. While we do not fault a CEO for taking money off the table, we must note that his stock sales exceeded the entire growth in shareholders value over the course of the quarter. http://finance.yahoo.com/q/it?s=MED
Maybe the CEO knew of the upcoming passage of Acomplia and was concerned about the effect it would have on his share price.
Medifast and Johns Hopkins- Not as it Seems
When doing research on Medifast, ********** took note of the company’s paid-for research from Johns Hopkins University regarding the Medifast diet. This seems to be a big selling point for Medifast, as their franchisees invoke this study to shout “CLINICALLY PROVEN” with regard to their products. Yet, one must read closely to truly understand the meaning of the results -- they are not exactly what they seem.
This is a classic case of the power of half-truth. Medifast hires Johns Hopkins to test its diet program, but the study is not standard double-blind science – it does not compare Medifast to other diet programs. The researcher only pulled random charts of participants who “completed the Medifast program”. The study comes only to the conclusion that “Medically-supervised, protein-sparing modified fasts offer a safe, effective means of weight reduction.” ********** has no debate with the narrow truth of the conclusion, but what proprietary edge does that demonstrate for Medifast ? What stated advantage is there over any other diet program? The answer is “None”.
The success of any of these diet programs lies in the “defined portion” strategy. Subjects restricted to eating exclusively any of these programs will lose weight. There is nothing in the Johns Hopkins study that validates Medifast’s program compared to other defined portion regimes.
-------------------- TI AKERS , WHERE ARE YOU!!! Posts: 899 | From: FT. Wayne to Raleigh-1986 | Registered: Feb 2003
| IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
