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3 Reasons MED is Risky and 1 Stock to Buy Instead

By: StockStory

October 02, 2025 at 00:28 AM EDT

MED Cover Image

Medifast has been treading water for the past six months, recording a small loss of 0.7% while holding steady at $13.57. The stock also fell short of the S&P 500’s 18.4% gain during that period.

Is there a buying opportunity in Medifast, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Medifast Will Underperform?

We're cautious about Medifast. Here are three reasons you should be careful with MED and a stock we'd rather own.

1. Revenue Spiraling Downwards

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Medifast struggled to consistently generate demand over the last three years as its sales dropped at a 33.9% annual rate. This was below our standards and signals it’s a low quality business.

2. EPS Trending Down

Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Sadly for Medifast, its EPS declined by 71.3% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

3. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Medifast’s margin dropped by 7.6 percentage points over the last year. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business. Medifast’s free cash flow margin for the trailing 12 months was breakeven.

Medifast Trailing 12-Month Free Cash Flow Margin

Final Judgment

We see the value of companies helping consumers, but in the case of Medifast, we’re out. With its shares underperforming the market lately, the stock trades at $13.57 per share (or a forward price-to-sales ratio of 0.4×). The market typically values companies like Medifast based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy. We’d suggest looking at the Amazon and PayPal of Latin America.

Stocks We Like More Than Medifast

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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