Medifast, Inc. (NYSE:MED), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$25.74 at one point, and dropping to the lows of US$17.94. 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$18.51 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.

Check out our latest analysis for Medifast

What Is Medifast Worth?

According to our valuation model, Medifast seems to be fairly priced at around 7.4% below our intrinsic value, which means if you buy Medifast today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $19.99, then there’s not much of an upside to gain from mispricing. So, is there another chance 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Medifast?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Medifast, at least in the near future.

What This Means For You

Are you a shareholder? Currently, MED appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on MED for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on MED should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Medifast at this point in time. Be aware that Medifast is showing 2 warning signs in our investment analysis and 1 of those can't be ignored...

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.