Pitch for Medifast stock in February 2011.

1. Medifast, Inc.
! Ticker: MED
! Price: $24.73 (2/7/11)
! Recommendation: BUY
! Price Target (12 months): $34.00
Chris Hemmelgarn
Sven Karlsson
Sarosh Nentin
February, 2011
!"

2. Investment Thesis
! Market Growth: Obesity increasing in United States
! Best Growth Opportunities Remain: Low penetration in
markets with best demographics
! Immediate Access to Growth Opportunities: Invested in
production and distribution capacity
! Market is does not fully understand/appreciate Multi-
Level Marketing (MLM) Sales Force Structure
! Growth Prospects for Brick & Mortar are not fully
anticipated
Recommending BUY with a 12-month price target of
$34.00/share representing 40% upside
#"

3. Medifast
! Designs, Produces, and Distributes Weight Management
Products in the United States
! Market Cap: $360 Million
! Revenues: $238 Million
! Earnings: $19 Million
! A standard 4-week package
for men costs $299.50 or less
than $11 per day (>80% of
all food required)
! Estimate 2-5lbs per week of
weight loss – industry leading
$"

4. Two Key Market Drivers
Weight Loss Market is driven primarily by
two factors
1. Disposable Income: diets are viewed as a
“luxury” item
2. Obesity: trending consistently upwards for
(at least) past 25 years
%"

5. &'()*+,"-.(/0)1"234/5"6787"209:+)"
;<=88>"!?@A"
(*BMI !30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

6. &'()*+,"-.(/0)1"234/5"6787"209:+)"
;<=88>"!??D"
(*BMI !30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

7. &'()*+,"-.(/0)1"234/5"6787"209:+)"
;<=88>"!??A"
(*BMI !30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

8. &'()*+,"-.(/0)1"234/5"6787"209:+)"
;<=88>"#DDD"
(*BMI !30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

9. &'()*+,"-.(/0)1"234/5"6787"209:+)"
;<=88>"#DDA"
(*BMI !30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

10. &'()*+,"-.(/0)1"234/5"6787"209:+)"
;<=88>"#DD?"
(*BMI !30, or ~ 30 lbs. overweight for 5’ 4” person)
No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

11. Market Growth
! The market for weight loss products is clearly
growing
! 60% of Medifast’s business is located in just 7
cities representing 4.2% of U.S. population
! None of these
metropolitan
locations areas
are in the states
with the worst
obesity
problems
$D"

12. Best Opportunities Remain
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No Data <10% 10%–14% 15%–19% 20%-24% 25%-29% !30%

13. Access to Opportunities
! Medifast has continued to invest in its business
through the recent recession
! Recently built a second distribution plant in
Dallas to double their capacity (online starting
4Q 2010)
! Estimated they now have capacity for $400
million in annual sales vs. current LTM revenues
of $240 million
! Planning to double this capacity to $800 million in
2011 for $2.5 million CapEx
$#"

14. Sales Channels
! Direct Marketing
! Brick & Mortar
! Take Shape for Life
Revenue by Segment LTM Revenue Growth by Segment
$$"

15. Sales Channels
Revenue by Channel
$%"

16. Take Shape for Life
Active Health Coaches
$A"

17. Take Shape for Life
Monthly Average Revenue per Coach
$B"

18. Weight Control Centers
Brick and Mortar Locations & Revenue
$C"

19. Direct Sales
Direct Response Revenue v. Ad Spend
$@"

20. Comparable Companies
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Multi-Level Marketing Comparables
USANA Health Sciences Inc. USNA $672.6 15.20x 8.95x 1.35x 1.3x 8.5x 13.6x 0.93
Avon Products Co Ltd. 4915 $51.1 NM 7.86x 0.16x NM NM NM NM
Nature's Sunshine Products Inc. NATR $134.2 10.36x 5.29x 0.24x NM NM NM NM
Reliv International, Inc. RELV $21.7 11.41x 3.67x 0.20x NM NM NM NM
Nu Skin Enterprises Inc. NUS $1,963.8 15.89x 8.00x 1.26x 1.2x 7.3x 14.0x 0.93
Pre-Paid Legal Services, Inc. PPD $631.5 10.46x 5.46x 1.30x NM NM NM NM
YTB International, Inc. YTBL.A $3.8 NM 5.04x 0.13x NM NM NM NM
Mean - MLM Com ps Only 12.66x 6.32x 0.66x 1.3x 7.9x 13.8x 0.93
Median - MLM Com ps Only 11.41x 5.46x 0.24x 1.3x 7.9x 13.8x 0.93
Competitors
Schiff Nutrition International Inc. WNI $232.3 13.46x 6.13x 0.91x 0.9x 7.7x 16.5x 2.06
Nutraceutical Intl Corp. NUTR $154.3 9.81x 5.35x 1.00x 1.0x - 9.2x NM
NutriSystem Inc. NTRI $552.4 22.23x 8.23x 0.97x 1.0x 6.1x 15.7x 0.90
Herbalife Ltd. HLF $4,065.6 16.17x 9.40x 1.56x 1.4x 8.3x 14.1x 0.92
Weight Watchers Intl, Inc. WTW $2,521.6 16.00x 10.36x 2.77x 2.7x 9.2x 13.1x 0.87
Ediets.com Inc. DIET $39.0 NM NM 1.88x 1.2x NM NM NM
Mean - Com petitors Only 15.53x 7.89x 1.52x 1.4x 7.8x 13.7x 1.19
Median - Com petitors Only 16.00x 8.23x 1.28x 1.1x 8.0x 14.1x 0.91
(1)
Wtd. Average Mean - MLM Com ps & Com petitors 13.53x 6.80x 0.92x 1.3x 7.9x 13.8x 1.01
(1)
Median - MLM Com ps & Com petitors 12.79x 6.29x 0.55x 1.2x 7.9x 13.9x 0.92
Medifast Inc. (NYSE:MED) $375.7 18.55x 9.32x 1.45x 1.1x 6.4x 14.0x 0.56
Source: CapitalIQ
(1)
Weighted Average Mean calculated using a 70% weighting on the MLM Comps and 30% on Competitors,
based on the % revenue contribution of the "Tak e Shape for Life" business line
$?"

21. Relative Valuation
! Target price based on P/E multiple
valuation
! EBITDA and Revenue multiple
valuation further confirm premium
%D"

22. Valuation
! DCF Valuation supports price target from Relative
Valuation
%!"

23. Key Risk Factors
! Low barriers to entry for competition or new entrant
into the market may develop a similar product/
program
! New fad diets or other substitute products could take
market share
! Slower Economic Recovery
! Supply Chain or Product Manufacturing Disruption
%#"

24. Nutrisystem (NTRI)
%$"

25. Nutrisystem (NTRI)
! Founded in 1971
! Explosive growth until the early 1990’s when the
company declared bankruptcy
! Decided to focus on online sales combined with
national advertising in 1999
! Strong growth through early 2000’s, but struggled over
the last few years due to declining effectiveness of
advertising and the recession
! Good company but 100% dependent on Advertising &
Direct Sales.
! 12-month price target of $21 (16x FY2011 EPS - $1.32)
%%"

26. NTRI Key Issue
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27. NTRI Sales
%B"

28. MED Sales
%C"

29. NTRI Earnings
%@"

30. MED Earnings
%?"

31. NTRI Historical P/E
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32. MED Historical P/E
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A!"

33. Investment Thesis
Recommending BUY with a 12-month
price target of $34.00/share
representing 40% upside
! Market Growth
! Best Growth Opportunities Remain
! Immediate Access to Growth Opportunities
! Market is Focused on Multi-Level Marketing (MLM) Sales
Force Structure
! Growth Prospects for Brick & Mortar are not fully
anticipated
A#"