Wellness company Medifast (NYSE: MED) met Wall Streets revenue expectations in Q3 CY2025, but sales fell by 36.2% year on year to $89.41 million. On the other hand, next quarter’s revenue guidance of $72.5 million was less impressive, coming in 1.8% below analysts’ estimates. Its GAAP loss of $0.21 per share was 41.7% above analysts’ consensus estimates.
Is now the time to buy Medifast? Find out by accessing our full research report, it’s free for active Edge members.
Medifast (MED) Q3 CY2025 Highlights:
- Revenue: $89.41 million vs analyst estimates of $89.7 million (36.2% year-on-year decline, in line)
- EPS (GAAP): -$0.21 vs analyst estimates of -$0.36 (41.7% beat)
- Revenue Guidance for Q4 CY2025 is $72.5 million at the midpoint, below analyst estimates of $73.8 million
- EPS (GAAP) guidance for Q4 CY2025 is $0.98 at the midpoint, beating analyst estimates by 317%
- Operating Margin: -4.6%, down from 1.5% in the same quarter last year
- Market Capitalization: $123.4 million
Company Overview
Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE: MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $429.7 million in revenue over the past 12 months, Medifast is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
As you can see below, Medifast struggled to generate demand over the last three years. Its sales dropped by 36% annually, a rough starting point for our analysis.
This quarter, Medifast reported a rather uninspiring 36.2% year-on-year revenue decline to $89.41 million of revenue, in line with Wall Street’s estimates. Company management is currently guiding for a 39.1% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 17.6% over the next 12 months. it’s hard to get excited about a company that is struggling with demand.
The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Medifast has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.3%, subpar for a consumer staples business.
Key Takeaways from Medifast’s Q3 Results
We were impressed by Medifast’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its gross margin missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, we think this was a mixed quarter. The stock remained flat at $11.79 immediately after reporting.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
