Wellness company Medifast (NYSE:MED) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 33.8% year on year to $115.7 million. Next quarter’s revenue guidance of $95 million underwhelmed, coming in 15.4% below analysts’ estimates. Its GAAP loss of $0.07 per share was 72% above analysts’ consensus estimates.

Is now the time to buy Medifast? Find out in our full research report.

"In today's health and wellness landscape, more people than ever are seeking guidance not just for weight loss but for learning how to lead a healthier lifestyle," said Dan Chard, CEO of Medifast.

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.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $543.5 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’s demand was weak over the last three years. Its sales fell by 30.3% annually, a tough starting point for our analysis.

This quarter, Medifast missed Wall Street’s estimates and reported a rather uninspiring 33.8% year-on-year revenue decline, generating $115.7 million of revenue. Company management is currently guiding for a 43.6% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 27.8% over the next 12 months. While this projection is better than its three-year trend, it's tough to feel optimistic about a company facing demand difficulties.

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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 impressive cash profitability, driven by its attractive business model that gives it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 7.3% over the last two years, better than the broader consumer staples sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Key Takeaways from Medifast’s Q1 Results

We were impressed by how significantly Medifast blew past analysts’ EPS expectations this quarter. On the other hand, its revenue missed and its guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4.6% to $12 immediately following the results.

Medifast didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.