STRONG BUY !!! Medifast, Inc.

Medifast, Inc. (MED - Snapshot Report) recently pulled back from its all-time high after rallying higher with the market for most of the last year. The long-term up trend is still in tact though on the company's solid Q1 results from early May and a bullish next-year projection.

Company Description

Medifast, through its subsidiaries, develops and sells weight and disease management products in the United States. The company was founded in 1980 and has a market cap of $400 million.

With fitness and vanity as popular as ever, more consumers are turning to vitamins and supplements to help transform them into beach-ready form. This trend has given the industry a nice boost over the last few years, more recently on display with Medifast's awesome Q1 results from May 5 that included a 22% earnings surprise.

First-Quarter Results

Revenue for the period was up 75% to $61 million. Earnings also came in strong at 33 cents, 22% ahead of the Zacks Consensus Estimate. The company has been hot in the bull market of the last year with an average earnings surprise of 16% over the last four quarters.

Medifast saw impressive gains in its highest-revenue product, Take Shape for Life, where sales were up 94% to $37.6 million. The company has also made progress on growing its pool of health coaches, jumping to 7,100 from just 4,00 last year.

Medifast complimented its impressive sales growth with effective cost management, with gross margin increasing 140 basis points to 75.5%.

Balance Sheet Strengthened

With strong operating cash flow of $14.2 million, up from $5.3 million last year, Medifast was able to strengthen its balance sheet, increasing cash and equivalents by 72% to $28 million with very little long-term debt of $5 million.

Estimates

Estimates took a nice little jump on the good quarter, with the current year adding 14 cents to $1.34. The next-year estimate added 11 cents to $1.71, a bullish 28% growth projection.

Valuation

In light of the recent run higher, shares of MED don't come cheap, trading with a forward P/E multiple of 22.5X, a premium to its peer's 16X. Its P/B of 8.37X is also ahead of its peer's 2.5X.

6-Month Chart

MED recently pulled back from its fresh all-time high to find some support between $28 and $30. The longer-term trend that began in February is still in play and should provide support on any more weakness. The stochastic below that chart is signaling that shares are close to being oversold, take a look below.