Seeking Alpha: Medifast May Be The Best House On A Scary Street

In principle, weight loss should be an incredible honey pot for pharmaceutical, packaged food, and consumer service companies. In reality, it has proven considerably more difficult for anybody to make consistently good money in the space. Sometimes the problems are largely self-inflicted (Weight Watchers (WTW) certainly comes to mind here), and sometimes the issue is more related to consumer patience/discipline.

Whatever the case, investors trying to profit from the weight loss theme through publicly-traded stocks have faced a treacherous environment. Nutrisystem (NTRI) has been strong this year, but the five-year returns of stocks like Weight Watchers, Nutrisystem, Arena Pharmaceuticals (ARNA), and Vivus (VVUS) haven't been that great relative to the S&P 500.

That brings me to Medifast (MED). Medifast has been quite strong relative to this group of weight loss-centric stocks (and the S&P 500 as well) over the past five years, though the last year hasn't been nearly so good. Although the company's weight control center strategy hasn't worked out so well, the relationship-driven "Take Shape For Life" has, and the company has generated some solid free cash flow of late. Although I have my concerns with the business model and the concept, the valuation doesn't seem demanding to me and this may be the best house on a very scary street.

Read the full article at Seeking Alpha here:
Medifast May Be The Best House On A Scary Street