Up More Than 50%: Is WELL Health a Buy at Today’s Price?

Given its healthy financials, growth prospects, and attractive valuation, I expect the rally in WELL Health’s stock price to continue.

| More on:
young woman celebrating a victory while working with mobile phone in the office

Image source: Getty Images

Last year was tough for WELL Health Technologies (TSX:WELL), as it faced substantial capital erosion amid inflationary pressure, rising interest rates, and an uncertain economic outlook. However, since the beginning of this year, the company has witnessed healthy buying amid easing inflation and lower interest rate hikes by the Federal Reserve of the United States. WELL stock is trading around 50% higher for this year. Despite the recent rise, the stock trades at a 56% discount from its all-time high. So, let’s evaluate whether the rally can continue.

First, let’s look at WELL’s performance in the third quarter of 2022.

WELL Health’s third-quarter performance

Despite challenging market conditions, WELL Health continued to drive its financials in the November-ending quarter, with its revenue growing by 47% year over year. Along with acquisitions, organic growth of 18% drove its sales. The virtual services segment delivered a solid performance, with its revenue growing by 191%. Meanwhile, the revenue from its omnichannel segment rose by 15%.

Along with top-line growth, the company’s gross margin expanded from 50.3% to 53.6% amid higher contributions from higher-margin virtual services. Revenue growth and expansion of gross margins increased its adjusted net income by 49.8% to $14.8 million. It also generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $27.5 million. The company closed the quarter with cash and cash equivalents at $52.4 million, thus allowing it to fund its growth prospects.

Notably, yesterday, WELL Health’s management provided preliminary data on patient visits during the fourth quarter. The company achieved a record 991,268 omnichannel patient visits during the quarter, representing 42% growth compared to the previous year’s quarter. In 2022, the company had 3.5 million omnichannel patient visits, representing year over year growth of over 50%.

Now, let’s look at its long-term growth prospects.

WELL Health’s growth prospects

The pandemic accelerated the adoption of telehealth services. The market continues to grow with the increased penetration of internet services and development of innovative product offerings. Grand View Research projects the global telehealth market to grow at a CAGR (compounded annual growth rate) of around 24% for the rest of this decade.

Meanwhile, WELL Health is expanding its footprint in Canada and the United States to strengthen its market share. In November, the company acquired primary care clinics and Cloud Practice, an electronic medical records and practice management software, of CloudMD Software & Services. Earlier, it had acquired Grand Canyon Anesthesia and took a majority stake in West Florida Anesthesia Associates, expanding its service to 18 U.S. states.

These growth initiatives could boost the company’s financials in the coming years. Looking forward, WELL Health’s management projects its revenue run rate to reach $700 million by the end of 2023. Notably, the company has maintained its profitability despite its recent acquisitions, which is encouraging.

Riding the telehealth wave

Despite the recent increase in its stock price, WELL Health trades at an attractive valuation, with its NTM (next 12 months) price-to-sales and price-to-earnings multiples standing at 1.6 and 16.9, respectively. So, considering its healthy financials, growth prospects, and attractive valuation, I expect WELL Health’s rally to continue.

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 Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Tech Stocks

A worker uses a double monitor computer screen in an office.
Tech Stocks

Better Buy: Shopify vs. Constellation Software

Are you interested in buying a tech stock? Find out which is the better buy between Shopify and Constellation Software.

Read more »

Woman has an idea
Tech Stocks

3 No-Brainer Stocks to Buy for Less Than the Cost of 1 Tesla Share

Are you confused as to whether to buy Tesla shares? Here are three no-brainer stocks that can give you exposure…

Read more »

Tech Stocks

1 Under-the-Radar Beneficiary From the Rise of ChatGPT

ChatGPT will benefit AI-enabled stocks like Docebo (TSX:DCBO).

Read more »

Businessman holding AI cloud
Tech Stocks

TFSA: 2 AI Growth Stocks for Your $6,500 Contribution

Here are two of the best AI stocks to buy in Canada in 2023.

Read more »

edit Colleagues chat over ketchup chips
Tech Stocks

The Best Stocks to Invest $50,000 in Right Now

You can create a portfolio of undervalued stocks with $50,000 right now. Here are three such stocks you can add…

Read more »

Tech Stocks

The Safest Semiconductor Chip Stocks to Own in March 2023

Canadians can invest in two safe semiconductor chip stocks, as the country prepares to expand its industry presence and become…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Tech Stocks

Market Tremors: Buy These ETFs While Everyone Else Is Selling

The US bank crisis has triggered a sell-off raising the risk of a stock market crash. It’s time to buy…

Read more »

Two colleagues working on new global financial strategy plan using tablet and laptop.
Tech Stocks

Treasure Hunting South of the Border: The 2 U.S. Stocks I’d Buy Today

Expand the horizon of your TFSA portfolio south of the border. Here are two stocks that have the potential for…

Read more »