Is Medifast the most valuable stock in the personal service sector? #stocks

The overall profitability of the personal service sector is not high, and the market's expectations for the platform economy have given the sector a higher valuation.

Based on the current profitability and valuation, a total of 1 stock is selected.

Star rating description:
⭐️⭐️⭐️: Best choice, with obvious profit and growth advantages, at a significant discount.
⭐️⭐️: Value or price slightly lower than the best choice.
⭐️: Only suitable for certain investment portfolios, such as small cap stocks, high-growth stocks, crisis stocks, flawed stocks, etc.
Investment amount based on star rating:e.g. 1 star $100, 2 stars $200, 3 stars $300-$400.

The analysis process is as follows 👇

Today is April 28, 2022, Thursday's pre-market trading in the US stock market, let's take a look at the individual services sector in the US stock market.

A total of 18 stocks, with market values ranging from 20 million to 16.5 billion, of which 14 stocks are smaller with market values of over 300 million.

In terms of P/E ratio, there are 5 stocks with negative earnings, 5 stocks with P/E ratios between 8.5 and 25, and 4 stocks with P/E ratios above 25. The short-term profitability of the sector is relatively poor and the valuation is higher.

First, let's take a look at the 9 stocks with P/E ratios greater than 0.

The fiscal year ends on June 30th. In 2022 Q1, revenue decreased by 70% to 0.19 billion, and Q2 continued to decrease by 10% to 0.16 billion. Both operating profit and net income turned into losses during the same period. However, based on previous years' records, the main revenue is usually in Q4, so it is currently difficult to determine the full-year revenue.

Currently, the P/E ratio of 8.9 times lacks data support.

Revenue, operating profit, and net income have achieved rapid growth for five consecutive years. The average growth rate of net income over five years is 56%, and the growth rate of earnings per share also matches.

Operating net cash flow and free cash flow have remained positive for the past five years. The current ratio is 1.8 and the quick ratio is 0.65, but cash is currently a bit low.

Return on equity has increased from 27% to 91%, indicating significant economies of scale. The gross margin has remained above 70%.

The asset-liability ratio has grown rapidly in recent years, from 25.6% to 49%. However, there is no interest expense shown on the income statement, indicating that all liabilities are interest-free. The balance sheet shows accounts receivable as 0 and inventory as 0.18 billion, which is very good. Fixed assets are only 0.11 billion, and total assets are only 0.4 billion, indicating a typical light-asset company. Accounts payable in liabilities amount to 0.12 billion, with long and short-term lease liabilities of over 30 million, and total liabilities of 0.2 billion, which is relatively healthy.

Overall, it is a low-cost, high-growth company with no financial obstacles to development. The main issue is the ceiling in the segmented market, but based on the current growth rate, there is no sign of reaching its limit.

Currently, the P/E ratio of 13 times is a good choice (⭐️⭐️⭐️).

Revenue and operating profit have maintained a 5-year growth, while net income has continuously declined in 2018 and 2019. Earnings per share grow at a slower rate than net income, with a 4-year average growth rate of 13.3%.

The gross margin remained relatively stable at around 23.5% in the first three years and increased to 28% and 31.5% in 2020 and 2021, respectively.

The decline in net income in 2018 was actually due to a tax refund in 2017, which inflated the net income for that year. The decline in 2019 was also due to an increase in tax costs. In 2020 and 2021, taxes continued to increase, but due to the faster growth of operating profit, net income still recovered.

The income statement shows a gradual decrease in interest expenses, currently 0.15 billion, accounting for 13% of operating profit, which is not a significant burden.

The asset-liability ratio is 88%, with little change over the past 5 years. Receivables and inventory are both low, and non-current assets account for a large proportion. It seems that this industry requires a significant investment. Although the debt ratio is high, it should not be a major problem considering the special nature of the industry.

Currently, the P/E ratio is 14.3. Considering the recent easing of the epidemic and the low possibility of high revenue growth, it is advisable to wait and see for now.

Revenue has been growing continuously for 5 years; operating profit has seen significant declines in 2018 and 2020, but overall there haven't been major changes in the past 5 years; net income has experienced severe declines in 2018 and 2020, and only recovered to 80% of the 2017 peak in 2021; EPS has undergone similar changes.

The income statement shows that the main reason for the decline in operating profit in 2018 was the decrease in gross margin, while the main reason for the decline in 2020 was the rapid increase in sales and administrative expenses. In 2021, net income further declined due to an additional 30 million in other special expenses.

The fluctuations in 2018 were likely due to the company going public, and the impact of management expenses in 2020 has gradually diminished, while the impact of special expenses is unpredictable.

However, the asset-to-liability ratio is very high, currently at 99.72%, with a current ratio of 0.78, a quick ratio of 0.71, and some issues with cash flow.

The current P/E ratio of 21 times appears to be somewhat overvalued.

After a significant 35% decline in revenue in 2018, it fluctuated around 2 billion, while operating profit continued to decline to 0.25 billion after a 49% decline to 0.29 billion in 2018; net income was in a loss in 2018, increased in 2019 and 2020, then dropped to 0.125 billion in 2021.

The current PE ratio of 45.8 times, neither the operating profit nor the net profit can support such a valuation.

Revenue and operating profit have been continuously growing for 5 years, while the net income had a 12% decline in 2019. The 5-year average growth rate is 16%, and the growth rate in 2021 is 34.5%.

The current PE ratio of 47 times is not very attractive.

Revenue declined by 26% in 2020, with a recovery in 2021, but only reaching 85% of 2019. Both operating profit and net income saw a significant decline in 2020 and did not fully recover in 2021.

The current PE ratio of 106 times is not attractive.

Here are 5 loss-making stocks with a P/E ratio less than 0.

In 2020, revenue slightly decreased by 8.7%, increased by 32% in 2021, but operating profit grew in 2020 and entered a loss range in 2021, with net income closely matching operating profit.

The profit statement shows that in 2020, the gross margin increased combined with a significant decrease in sales and administrative expenses, resulting in a rise in operating profit; in 2021, sales and operating expenses increased significantly by 0.24 billion, a slight decrease in gross margin led to a significant drop in net income in 2021.

It is currently difficult to estimate how much of this 0.24 billion is a one-off expense for going public, wait for the next financial report to determine.

Over the past 4 years, there has been little change in revenue, with continuous losses for 4 years; the loss narrowed at one point but widened again in 2021.

Currently there is no attractiveness.

After a 50% decline in revenue in 2020, it recovered its growth in 2021. Operating profit and net income are both in losses, with the loss of net income expanding. Currently there is no attractiveness.

There is little change in revenue, but from 2017 to 2019, operating profit was in loss, and only slightly profitable in 2020 and 2021.

The income statement shows that the company's sales and management expenses are disproportionately high. I don't know what the situation is for a company to spend such a large amount of money on promotion.

Currently, the debt-to-asset ratio is already 108%, which is not attractive.

Revenue has been continuously growing for 2 years, while operating profit and net income have been continuously declining for 2 years, entering a loss range. This is not attractive at all.

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