The Motley Fool

Why WELL Health Stock (TSX:WELL) Made Headlines This Week

Person Hands Opening Mailbox To Remove Newspaper
Image source: Getty Images

WELL Health Technologies (TSX:WELL) made headlines on the TSX this week because of, well the TSX! WELL Health stock announced that as of September 20, 2021, its shares would be added to the S&P/TSX Composite Index prior to the open of trading. While shares didn’t move all that much at the time, now could be a great time for Motley Fool investors to consider WELL Health stock.

What happened

The announcement that WELL Health stock would be added to the S&P/TSX didn’t make all that much headway at first. Shares of the company remained around the $8 mark at the news. In fact, year-to-date shares are almost exactly where they were back in January! In the past month, shares have only increased about 5% after over a year of insane growth from use during the pandemic.  Yet Motley Fool and other investors worried that perhaps the company won’t be of much use post-pandemic.

But that’s simply not the case, and it’s perhaps why adding it to the S&P/TSX now is the best time.

So what

Here’s the thing, you’re on Motley Fool so you’re likely already aware of WELL Health stock and its recent movement. But being added to the S&P/TSX is a great thing for management. It helps investors find the stock in the first place, as they’ll be able to see it among a list of holdings. In fact, analysts have found that when companies are added to major indexes such as the S&P/TSX, share prices rise significantly. When they are delisted, the reverse happens.

Index inclusion increases the demand for a company’s stock. The share price increase may actually be associated with earnings forecasted by analysts, and improvements on earnings due to the company’s being added to an index. But mainly, it’s that now these companies are becoming more mainstream, with investors aware of the stock in the first place.

Now what

If you’re a Motley Fool investor looking to get in on a deal, then right now is an excellent time to consider WELL Health stock. The company, as mentioned, didn’t move all that much after the news. In fact, after dropping from the worries of a post-pandemic world, it’s a great time to buy during a pullback.

WELL Health stock continues to post record revenue, making strong acquisitions to boot during this time. It’s becoming not just a Canada-wide telehealth company, but North America-wide as well after a recent United States acquisition. And given that it’s online, there’s no reason the company can’t go global.

That makes today’s stock price of around $8 per share a steal. It has solid recurring revenue from these acquisitions. It continues to find new opportunities, becoming Canada’s largest outpatient medical clinic. WELL Health stock continues to post record revenue, most recently rising 484% year over year, with the third quarter of a positive adjusted EBITDA. Adjusted gross profit rose 615% year over year, and there is a strong outlook for the next quarter thanks to recent acquisitions.

Bottom line

Analysts believe the stock is undervalued based on this future information. WELL Health stock currently has an average potential upside of around 50% for the next year, and could indeed double based on the S&P/TSX news. Yet shares are up 1,456% in the last three years!

Analysts believe it’s a strong buy, with the world not changing so much after the pandemic. Telehealth is simply too easy, convenient, and cheap to ignore. So Motley Fool investors shouldn’t ignore it either.

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 Amy Legate-Wolfe owns shares of WELL Health Technologies Corp. The Motley Fool has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.