MEDIFAST INC Current Financial Leverage

MED Stock  USD 37.53  0.46  1.24%   
MEDIFAST INC holds a debt-to-equity ratio of 0.434. At present, MEDIFAST INC's Short Term Debt is projected to increase significantly based on the last few years of reporting. The current year's Short and Long Term Debt is expected to grow to about 277.2 K, whereas Long Term Debt To Capitalization is forecasted to decline to 0.07. MEDIFAST INC's financial risk is the risk to MEDIFAST INC stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

MEDIFAST INC's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. MEDIFAST INC's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps MEDIFAST Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect MEDIFAST INC's stakeholders.
For most companies, including MEDIFAST INC, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running MEDIFAST INC the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book
2.0047
Book Value
18.687
Operating Margin
0.0454
Profit Margin
0.0927
Return On Assets
0.2524
At present, MEDIFAST INC's Short Term Debt is projected to increase significantly based on the last few years of reporting. The current year's Short and Long Term Debt is expected to grow to about 277.2 K, whereas Long Term Debt To Capitalization is forecasted to decline to 0.07.
  
Check out the analysis of MEDIFAST INC Fundamentals Over Time.
For information on how to trade MEDIFAST Stock refer to our How to Trade MEDIFAST Stock guide.

MEDIFAST INC Financial Leverage Rating

MEDIFAST INC bond ratings play a critical role in determining how much MEDIFAST INC have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for MEDIFAST INC's borrowing costs.
Piotroski F Score
5  Healthy
Beneish M Score

MEDIFAST INC Debt to Cash Allocation

As MEDIFAST INC follows its natural business cycle, the capital allocation decisions will not magically go away. MEDIFAST INC's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company has 22.01 M in debt with debt to equity (D/E) ratio of 0.43, which is OK given its current industry classification. MEDIFAST INC has a current ratio of 1.26, demonstrating that it may not be capable to disburse its financial commitments when the payables are due. Debt can assist MEDIFAST INC until it has trouble settling it off, either with new capital or with free cash flow. So, MEDIFAST INC's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like MEDIFAST INC sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for MEDIFAST to invest in growth at high rates of return. When we think about MEDIFAST INC's use of debt, we should always consider it together with cash and equity.

MEDIFAST INC Total Assets Over Time

MEDIFAST INC Assets Financed by Debt

Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the MEDIFAST INC's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of MEDIFAST INC, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a MEDIFAST INC debt ratio should be compared their industry average or other competing firms.

MEDIFAST Short Long Term Debt Total

Short Long Term Debt Total

23.11 Million

At present, MEDIFAST INC's Short and Long Term Debt Total is projected to increase significantly based on the last few years of reporting.

Understaning MEDIFAST INC Use of Financial Leverage

MEDIFAST INC financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures MEDIFAST INC's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of MEDIFAST INC assets, the company is considered highly leveraged. Understanding the composition and structure of overall MEDIFAST INC debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it. Financial leverage can amplify the potential profits to MEDIFAST INC's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of MEDIFAST INC's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for 2024
Short and Long Term Debt Total22 M23.1 M
Net Debt-72.4 M-68.8 M
Short Term Debt5.9 M6.2 M
Long Term Debt 0.00  0.00 
Long Term Debt Total 0.00  0.00 
Short and Long Term Debt197.1 K277.2 K
Long Term Debt To Capitalization 0.07  0.07 
Total Debt To Capitalization 0.1  0.09 
Debt Equity Ratio 0.11  0.14 
Debt Ratio 0.07  0.07 
Cash Flow To Debt Ratio 6.71  6.56 
Please read more on our technical analysis page.

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When determining whether MEDIFAST INC is a strong investment it is important to analyze MEDIFAST INC's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact MEDIFAST INC's future performance. For an informed investment choice regarding MEDIFAST Stock, refer to the following important reports:
Check out the analysis of MEDIFAST INC Fundamentals Over Time.
For information on how to trade MEDIFAST Stock refer to our How to Trade MEDIFAST Stock guide.
Note that the MEDIFAST INC information on this page should be used as a complementary analysis to other MEDIFAST INC's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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When running MEDIFAST INC's price analysis, check to measure MEDIFAST INC's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy MEDIFAST INC is operating at the current time. Most of MEDIFAST INC's value examination focuses on studying past and present price action to predict the probability of MEDIFAST INC's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move MEDIFAST INC's price. Additionally, you may evaluate how the addition of MEDIFAST INC to your portfolios can decrease your overall portfolio volatility.
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Is MEDIFAST INC's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of MEDIFAST INC. If investors know MEDIFAST will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about MEDIFAST INC listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
(0.77)
Dividend Share
4.95
Earnings Share
9.1
Revenue Per Share
98.498
Quarterly Revenue Growth
(0.43)
The market value of MEDIFAST INC is measured differently than its book value, which is the value of MEDIFAST that is recorded on the company's balance sheet. Investors also form their own opinion of MEDIFAST INC's value that differs from its market value or its book value, called intrinsic value, which is MEDIFAST INC's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because MEDIFAST INC's market value can be influenced by many factors that don't directly affect MEDIFAST INC's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between MEDIFAST INC's value and its price as these two are different measures arrived at by different means. Investors typically determine if MEDIFAST INC is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, MEDIFAST INC's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.