WELL Health Hints at NASDAQ IPO

WELL Health stock remains a top bet for both growth and contrarian investors right now.

| 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

One of the most popular stocks among analysts this year has been the digital health stock WELL Health Technologies (TSX:WELL). With a track record of innovation and big-ticket acquisitions, WELL Health is consistently brought up in value discussions.

Lately, the conversation has been even more interesting following WELL’s Q1 earnings call in which the company disclosed its engagement with renowned law firm Fenwick & West to help it with a U.S. IPO listing in Q4 of 2021. Fenwick is a high-profile name on Wall Street; it led Facebook’s IPO and its client base includes tech giants such as Amazon and Cisco. It was also involved in the recent IPO listing of Coinbase. With WELL’s American peers trading considerable multiples higher, investors have now been given a unique opportunity to get in early. 

WELL Health stock is grossly undervalued

WELL Health stock is valued at a market cap of $1.4 billion. This suggests its trading at a forward price-to-sales multiple of less than six, which is very reasonable given that analysts forecast the company to grow revenue by a staggering 367.5% year over year in 2021. Bay Street analysts also expect WELL Health to increase the top line by 40% to $329 million in 2022.

WELL stock is undervalued when you compare it with digital-health peers south of the border. For example, analysts expect Teladoc to post an earnings loss of US$0.91 per share. Comparatively, WELL Health is expected to improve its bottom line from a loss per share of $0.03 in 2020 to earnings of $0.08 in 2022.

We can see WELL Health is trading at a significantly lower multiple, despite the fact that it is expanding revenue and profit margins at a faster pace. This is being demonstrated in the technicals as well. We are seeing overall short interest and volume decrease, while the cost to borrow is increasing. Investors are quickly becoming aware of WELL Health, and they want a piece of it. 

What’s next for investors?

While the lower valuation of WELL stock is enticing, long-term investors should find comfort knowing that the company is also part of a recession-proof industry. The ongoing pandemic accelerated the adoption of digital health services, driving revenue growth at an astounding pace for WELL Health and its peers.

WELL Health is already the single largest chain of primary healthcare clinics in British Columbia, and its recent acquisition of CRH Medical will help the company gain traction in the U.S. as well.  The company has over 1,000 healthcare practitioners working in its lines of business, and it owns several significant telehealth and EHR platforms that position it to be top three in both telehealth and EHR categories in Canada.

CRH will be highly accretive to WELL Health as it is expected to generate sales of US$150 million and a free cash flow of US$40 million in 2021. Part of the CRH Medical acquisition included JP Morgan increasing its credit line by US$100 million to US$300 million, such that the company may continue to grow via M&A activity in 2021 and beyond.

We believe WELL is a unique and accessible opportunity for investors to acquire via its TSX listing in advance of the upcoming NASDAQ listing. WELL’s multiples are sure to grow, as it accesses the U.S. markets, where multiples are generally more than 50% higher than WELL’s current trading multiple. WELL will be favourably compared against similarly sized companies in the tech-enabled healthcare space. 

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. David Gardner owns shares of Amazon and Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of and recommends Amazon, Facebook, and Teladoc Health and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Aditya Raghunath 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 »