Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Shares of Medifast Inc. Jumped

By Jeremy Bowman - Mar 11, 2014 at 5:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Medifast Inc. ( MED 1.33% ) were looking healthier today, gaining as much as 10% after reporting fourth-quarter earnings last night and announcing an expansion into Canada.

So what: The weight-loss management specialist said that revenue declined 7% to $77.3 million, worse than estimates, though earnings of $0.39 per share topped expectations at $0.36. CEO Michael MacDonald noted that the company improved operating margin by 480 points in the quarter, helping it to nearly double operating income to $7.0 million. Separately, the company announced it would expand into Canada in the first quarter, beginning by selling through its e-commerce site. 

Now what: While the Canadian expansion will grow Medifast's addressable market by 30 million consumers, the company's guidance was still light for the coming year. Management said it expects revenue of $340 million to $380 million, against estimates of $373 million, and EPS of $1.80-$1.90, below the consensus at $1.93. The improvement in operating margin may be encouraging, but given the flat revenue guidance and downside EPS outlook, today's jump looks exaggerated. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Medifast, Inc. Stock Quote
Medifast, Inc.
$206.68 (1.33%) $2.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.