WELL Health Looks Like the Most Undervalued Stock on the TSX

WELL Health has consistently grown its sales in recent years and, despite a rally recently, is one of the most undervalued stocks on the TSX.

| More on:
healthcare pharma

Image source: Getty Images

One of the most basic risks that investors take on when investing in stocks is called market risk. There’s always the risk that market conditions worsen and the broader stock market loses significant value, such as what we saw throughout 2022. And when these environments occur, even the best stocks can lose value, creating major opportunities for savvy investors.

WELL Health Technologies (TSX:WELL), the rapidly growing healthcare tech stock, is one of those companies.

WELL was a popular stock, especially during the early stages of the pandemic. And although it’s continued to grow and consistently exceeds expectations, it’s lost value for years now.

At first, it pulled back, as the pandemic faded, and investors shifted their focus toward reopening stocks and away from healthcare.

However, it also lost a tonne of value in 2022, as many tech stocks saw their valuations erode and the broader market sold off while interest rates were rapidly rising.

In recent weeks, WELL Health stock has started to recover and already actually rallied by more than 40% since its low on December 22 of last year.

However, it’s still considerably undervalued while simultaneously growing at an impressive rate. So, let’s look at just how cheap WELL Health Technologies is today.

WELL’s growth has been spectacular and set to continue

Back in 2020, the first year of the pandemic, WELL managed to report just over $50 million in revenue. By 2021, that revenue grew to an astonishing $302 million for the year. And now, over the last 12 months, WELL has reported over $525 million in sales.

For all of 2022, analysts are estimating WELL will report sales of roughly $566 million, which would be 87% growth year over year from 2021.

Furthermore, in 2023 analysts estimate sales will grow by over 15%, but, more importantly, its profitability will continue to improve.

Plus, none of these estimates account for the potential that WELL Health stock could make more acquisitions. WELL has shown on several occasions its ability to make value-accretive acquisitions, which could allow the stock to end up growing even faster.

Therefore, when you consider this impressive and consistent growth, it’s surprising to see WELL Health stock trading at such an undervalued price.

How cheap is WELL Health stock?

Despite the constant and impressive growth from WELL, it’s lost a significant amount of value over the last year and a half. In the middle of 2021, for example, WELL was trading at just under $9 a share. Today, it trades at less than half that price, despite the fact that it’s operations have grown significantly since then.

This just goes to show how cheap WELL is. Currently, WELL Health stock trades at a forward enterprise value (EV) to sales ratio of just 2.1 times. Meanwhile, its three-year average is 5.9 times.

Therefore, it’s pretty clear just how cheap WELL is today. Furthermore, because it serves the healthcare industry, one of the most defensive industries there is, WELL has the potential to continue growing, even if the economic situation worsens.

So, it’s no surprise that all five analysts who cover WELL Health stock give it a buy rating. It’s also not surprising that WELL’s average analyst target price is roughly $8, a more than 100% premium to where the stock trades today.

So, if you’re looking for an undervalued stock to buy now, or a high-potential growth stock trading at an attractive valuation, WELL Health stock is one of the best investments that Canadians can make in this environment.

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 Daniel Da Costa has positions in Well Health Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Thursday, June 20

After surging to fresh record highs last month, the TSX Composite benchmark currently trades at its lowest level since February…

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Monthly-Paying Dividend Stocks That Are Screaming Buys Right Now

These three monthly-paying dividend stocks are excellent additions to your portfolios.

Read more »

A bull outlined against a field
Stocks for Beginners

Top 5 Sectors to Watch in a Bullish Market

Do you want growth in a bull market? These aren't just the sectors to watch but the stocks that should…

Read more »

Growing plant shoots on coins
Dividend Stocks

TFSA Set and Forget: 1 Dividend-Growth Superstar for the Long Run

Manulife Financial (TSX:MFC) stock is in the zone, with dividend hikes and big buybacks likely in the cards.

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Dividend Stocks

For a Shot at $6,228/Year in Passive Income, Buy 755 Shares of This TSX Stock

Looking for passive income? You'll need to look beyond only dividends. Which is why EIF stock could be one of…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Investors: 2 Dividend Stocks I’d Buy and Hold Forever

These two stocks could provide long-term investors multi-year returns of more or less 10% per year

Read more »

crypto, chart, stocks
Dividend Stocks

Why Waste Connections Stock Keeps Going Up

Waste Connections stock (TSX:WCN) continues to hit all-time highs. But is more on the way, or is an investment wasteful?

Read more »

Money growing in soil , Business success concept.
Dividend Stocks

A Dividend Giant I’d Buy Over Suncor Stock

Suncor Energy is a blue-chip TSX dividend stock that offers you a tasty yield. But this TSX dividend giant is…

Read more »