WELL Health Technologies Is a Great Buy After a 25% Pullback

WELL Health Technologies (TSX:WELL) is a white-hot growth stock that should be rallying after posting another quarter of incredible top-line growth.

| More on:
healthcare pharma

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

WELL Health Technologies (TSX:WELL) has been under pressure for a large chunk of 2021. With shares fresh off a 25% pullback, venturesome Canadian investors looking to punch their ticket to a digital health play may finally have their chance to jump in.

For those unfamiliar with the name, WELL Health is a Vancouver-based omnichannel virtual health technology company that exploded onto the scene during the pandemic.

WELL stock popped over 550% from a buck and change back in March 2020 to its February 2021 peak at nearly $9 before pulling back to $6.85, where shares currently sit today. The company is a promising up-and-coming mid-cap with a $1.34 billion market cap, and, in many ways, its growth story seems to rhyme with that of Teledoc, one of the hottest virtual healthcare plays on the planet.

Catch WELL Health Technologies stock while it takes a breather

Investors are right to be exciting about WELL Health. Digital health is one of the hottest growth segments out there. Any time you’ve got a massive total addressable market (TAM) and a technological disruptor that could carve out a large position of the market for itself, you could be looking at a potential multi-bagger.

After the stock’s incredible past-year run, WELL’s valuation metrics have swollen considerably. The stock currently trades at just north of 20 times sales. That’s not cheap by any stretch of the imagination. But for the kind of growth you’ll be getting from the name, I’d argue that WELL stock isn’t nearly as expensive compared to most other hyper-growth tech stocks out there, especially after the recent pullback. In any case, I see WELL stock as boasting a slight premium over its peers in the digital health arena.

A solid quarter dampened by broader growth sell-off

WELL Health clocked in some solid numbers for the first quarter of fiscal 2021. Revenue grew by 150% to $25.6 million, thanks partly to tremendous strength in its software & services segment, which experienced an incredible 345% in year-over-year growth to $7.6 million. Adjusted EBITDA came in at $0.5 million versus the $0.2 million loss posted over the same quarter last year.

As impressive as the growth numbers were, they failed to move the needle on shares, as Mr. Market had continued to punish growth stocks. On the EPS front, WELL missed the mark with a $0.04 loss, which was two pennies more than the $0.02 loss that the Street was calling for. It was an earnings beat at a time when the market was not even rewarding blowout earnings for top growers.

As WELL Health continues pursuing M&A opportunities in the broader digital health space, I suspect investors will be rewarded for their patience. The recent acquisition of innovative gastroenterology (GI) firm CRH Medical is going smoothly and looks to be in great hands under the leadership of WELL Health CEO Hamed Shahbazi.

WELL stock is doing incredibly well!

At just 5.2 times book, I think contrarians have a lot to gain by scooping up a few WELL shares after the latest pullback, which is likely unwarranted and overblown. There’s no telling when the market will stop punishing growth, but when rates settle down, and growth stocks finally bottom on, I’d look for WELL stock to be one of the quickest to bounce.

It’s a rare gem on the TSX that I think is more than worthy of a premium price tag, given its incredible momentum.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

More on Tech Stocks

clock time
Tech Stocks

Now’s the Time to Load Up the TFSA With These 2 Top TSX Stocks

Here are two top TSX stocks that long-term growth investors may not want to give up on, especially at these…

Read more »

shopping online, e-commerce
Tech Stocks

Shopify (TSX:SHOP) Stock Recovers 30% From its 3-Year Lows: Should You Buy?

Shopify stock: Should you buy the dip or wait for more weakness?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

What Market Correction? 2 High-Growth Tech Stocks That Are on the Rise

I don’t think it will be long before these two Canadian tech stocks are back to delivering market-crushing returns.

Read more »

grow dividends
Tech Stocks

Why Kinaxis (TSX:KXS) Stock Jumped 14% Last Week

Kinaxis Inc. (TSX:KXS) stock popped over the past week after adding yet another big company to its impressive stable.

Read more »

potted green plant grows up in arrow shape
Tech Stocks

TFSA Investors: Double Your Investments With These 3 Top Growth Stocks

Despite the volatility, I am bullish on these three stocks, given their solid growth potential.

Read more »

Arrow descending on a graph
Tech Stocks

2 Industries That Saw the Worst Decline Last Month

The TSX has been declining at a sharp angle since the beginning of June. And two industries (crypto and cannabis)…

Read more »

Dividend Stocks

TFSA Investors: Turn $1,000 Into $10,000 in 10 Years

10-fold growth within a decade is rare but not unheard of. You can capture this growth either by predicting a…

Read more »

Growth from coins
Tech Stocks

Got $1,000? Buy These 3 Under-$20 Growth Stocks to Earn Higher Returns

These under-$20 growth stocks can deliver solid returns in the long run.

Read more »