I posted the content below at the other fool too: discussion.fool.com - Med medifast fallen knife

I'm curious if anyone follows / knows about Medifast and has opinions they would want to share?

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Anyone following Medifast (MED)? I'm trying to figure out if it's a fallen knife or a value trap. It seems like a fallen knife to me.

Some company background:
- Medifast operates in the weight loss market.
- Medifast operates primarily in the US with some international exposure.
- Medifast has physical stores and utilizes coaches to push product & support customer weight loss goals.
- Medifast is a bit different than other MLM / weight loss companies since the coaches don't buy or hold inventory or control pricing.
An extremely detailed company profile and background can be found at VIC: Value Investors Club / MEDIFAST INC (MED) 1, or a great short investor summary can be found here: Medifast, Inc. - Events & Presentations 1
- There is a bunch of great information in the VIC writeup describing the OPTAVIA program and client success.
- There is some insider buying occurring. The CEO / Chairman picked up some shares at a much higher price last spring.

Financial background:
- MED is trading at a PE of around 8.
- Revenue and earnings started to explode after 2016 when the OPTAVIA product was rolled out. Revenue and earnings per share increased a bit over 6X in the last six years.
MED has no debt, has a very decent dividend yield, and, has repurchased a small amount of shares.
- YoY revenues are dropping while costs are increasing so margin is taking a hit. Revenues were blamed on 'coach productivity' on the last conference call and we all know about the inflation issues.

The revenue thoughts:
- The number of coaches is still growing, up 8.5% YoY.
- While the number of coaches grew 8.5% YoY the revenue per coach was down 13% YoY and 15% of active clients left. From surveying the clients that left, management believes the inflationary environment / uncertainty around the economy caused the separations.
- According to management, retention rates are stabilizing but the acquisition rate is about 85% of norm.
- The major question: if OPTAVIA is stalling out due to inflation, fear, or whatever - current management team inherited the OPTAVIA program, prior management team was responsible for creation and initial roll out. It's not clear the current management team has the ability to make a new OPTAVIA like program to drive growth or fix whatever may be wrong. It's super easy to ride someone else's hard work and super hard to bring original thought and original growth.

Final thoughts:
- Seems like a lower risk investment.
- Medifast has a product that seems to work for a lot of folks. The world isn't getting skinnier and there is an evergreen and ever growing market for weight loss programs.
Even if growth continues to slows or matches inflation, the current valuation seems to provide great downside protection.
Medifast doesn't seem like a value trap since it's acquiring new coaches still. Everyone is dealing with inflation. This seems like a bump in the road. Having no debt is a huge plus.
- Growth doesn't have to return to 60% YoY type rates. If growth returns enough to reward Medifast with a 15PE then the share price would be around $200; that's a pretty great return assuming that happens in the next couple / few years. It seems like a small hurdle.
More people sign up to work in the MLM space when the economy hits hard times since it's an easy target and people want to eat / keep their house. This trend even shows up in the 2007/2008/2009/2010 data for Medifast.
- Value Line thinks it'll be worth a whole lot more in the next few years.

Any thoughts / opinions?