The steep decline in growth stocks over the last few months has allowed investors an opportunity to buy companies at a discount. One such quality growth stock trading on the TSX is WELL Health (TSX:WELL), which has declined by 53% in the last year. Despite the ongoing pullback, WELL stock has returned 4,240% to investors since it went public in 2016.
Let’s see why WELL Health should be part of your growth portfolio right now.
An overview
WELL Health is an acquisitive company that follows a disciplined and accretive capital-allocation strategy. Its mergers and acquisition strategy is based on the acquisition of clinical and digital assets that are highly accretive. WELL Health aims to acquire cash-generating companies that lead to higher cash flows, which, in turn, will be reinvested to acquire other cash-generating entities.
The company operates under a shared services model, allowing it to benefit from a lower costs structure and technology improvements. Its omni-channel patient services platform includes primary care, allied care, diagnostics, specialized care, and telehealth offerings.
In the first nine months of 2021, WELL Health acquired the following:
- MyHealth: It has over 760 physicians and healthcare professionals that provide primary care, specialty care, and other health services in 48 locations across Ontario.
- ExecHealth: It’s an Ottawa-based healthcare provider specializing in corporate and executive health as well as primary care and integrate health services.
- CRH Medical: It’s a company that’s a leading provider of anesthesia services to the gastroenterologist community.
- Intrahealth: It provides enterprise class EMR and clinical healthcare software with customers in Canada, Australia, and New Zealand.
WELL Health stock has massive upside potential
WELL Health expects to report an annualized revenue run rate exceeding $450 million in Q4, which suggests its quarterly revenue will be around $113 million. It also expects adjusted EBITDA run-rate to approach $100 million in the December quarter.
The company stated that omni-channel patient visits more than doubled year over year in Q4 while it grew 19% sequentially to 692,913. WELL Health also confirmed it’s on track to deliver US$43 million in free cash flow for 2021.
Driven by strong revenue from Circle Medical and Wisp, WELL expects robust growth from its virtual services based out of the United States. The combined revenue run-rate from the two entities is on track to surpass US$100 million in 2022.
Hamed Shahbazi, chairman and CEO of WELL Health, emphasized, “With our strong balance sheet and positive cash generation profile, WELL is favourably positioned to continue to grow both organically and inorganically. We believe revenue, adjusted EBITDA and cash flow are key metrics to watch as we expected them to continue to rise on a per-share basis.”
The Foolish takeaway
Analysts tracking WELL stock expect the company to report sales of $299 million in 2021 — an increase of almost 500% year over year. Comparatively, its top line is forecast to rise by another 63% to $490 million in 2022.
Given its market cap of $895 million, WELL stock is valued at a really cheap price-to-forward-2022-sales multiple of 1.8 times. Analysts tracking WELL stock have a 12-month average price target of $11, which is 153% above its current trading price.
