Stocks To Watch: IBD 50 Firm In Recovery Mode After Record Earnings

Among leading growth stocks, our IBD 50 Stocks To Watch pick for today is Medifast (MED). The company manufactures weight and disease management products and is behind one of the fastest-growing health and wellness communities known as Optavia. The stock is forming a new base with a 337.09 buy point, but MED stock is still below its 10-week moving average as it tries to form the right side of the base.


Growth Stocks: Medifast

On May 4, Medifast reported first-quarter results that handily beat analyst expectations. The Baltimore-based company highlighted an exceptional quarter of growth and productivity.

The growth stock broke out from a prior base a few days later. Shares then rocketed 20% higher and reached the profit zone from a 279.56 proper buy point. Currently, the stock is trading off its most recent high and is trying to regain support at the 10-week line. On Thursday, Medifast pared losses of 3% to a decline of 2% in late trading.

At the end of this week, Medifast will have completed the formation of a new six-week cup base. The buy point of the base is just 10 cents above the highest point in the cup formation, or 337.09.

Medifast carries a perfect IBD Composite Rating of 99, alongside a solid 90 Relative Strength Rating and double digit growth on both its top and bottom-line, on a year-over-year basis.

A Growth Story

The firm posted a Q1 sales increase of 91% to $340.7 million. Meanwhile, EPS jumped 79% to $3.46 a share, according to FactSet. In addition, the company’s latest top- and bottom-line increases met the minimum of 25% that IBD’s CAN SLIM strategy looks for in leading growth stocks.

“This has been an exceptional quarter of growth and productivity,” said Dan Chard, Chief Executive of Medifast, in a recent news release. “We now have a record 52,500 Optavia Coaches who are achieving new productivity highs by leveraging technology to support clients.”

“Consumer interest in health and wellness remains high, and the strength of the Optavia coach-based model has continued to attract robust numbers of new clients. By harnessing demand and leveraging our organizational capabilities, we have amplified revenue and earnings growth to record levels. “

As of the end of the last quarter, the Optavia line of products accounted for 88.9% of consumable units sold. That was up from 79% a year earlier.

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Analysts expect the firm’s second-quarter earnings to taper off ever so slightly in terms of year-over-year growth. Still, the company is expected to maintain double-digit increases on both its top and bottom lines. Earnings are expected to rise 69% year-over-year to a profit of $3.31 cents a share. Wall Street projects the firm’s revenue will rise 63% to $358.5 million.

Follow Fox on Twitter at @foxonstocks for more analysis on other growth stocks.


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