WELL Health Technologies (TSX:WELL) is a digital healthcare company that facilitates healthcare practitioners to provide virtual care and digital patient engagement services. Last week, the company reported an impressive 2022 performance and provided solid 2023 guidance, driving its stock higher. The company is trading over 13% higher since its earnings on March 21. Despite the recent surge, it trades around 50% lower than its 52-week high. So, let’s assess the buying opportunities in the company right now.
First, let’s look at its 2022 performance in detail.
WELL Health’s 2022 performance
For the fiscal completed on December 31, WELL Health has reported revenue of $569.1 million, representing a year-over-year growth of 88%. Organic growth and acquisitions drove its growth. The company posted solid performances across its segments, with the revenue from omnichannel and virtual services segments growing by 66% and 154%, respectively.
The company had around 3.5 million omnichannel patient visits in the year, while total patient interactions stood at five million. Recurring or highly recurring revenue sources form approximately 96% of its top line, which is encouraging.
Along with top-line growth, WELL Health’s gross margin expanded from 50.8% to 53.3%, thanks to increased contributions from higher-margin virtual services. Supported by top-line growth and gross margin expansion, its adjusted net income grew by 228% to $53.7 million. Also, the company generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted free cash flow of $104.6 million and $48.8 million, respectively. Now, let’s look at its outlook.
Outlook
With the growing internet penetration and development of innovative products, telehealthcare services are becoming popular. The accessibility and convenience these services offer could also contribute to the expansion. Meanwhile, Grand View Research projects the global telehealth market to grow at a CAGR (compound annual growth rate) of 24% through 2030. So, the expanding addressable market could benefit WELL Health.
Meanwhile, supported by its solid growth and robust cash flows, the company has continued to expand its footprint in the United States and Canada to strengthen its market share. In November, the company acquired Cloud Practice and three primary care clinics from CloudMD Software & Services for $5.75 million. Earlier this month, it acquired a 51% stake in Affiliated Tampa Anesthesia Associates. It also recently made an investment in doctorly GmbH, a German-based company that offers medical practice management software. So, the company’s growth prospects look healthy.
WELL Health’s management has provided optimistic guidance for 2023. The management projects its 2022 revenue to come in the range of $665-$685 million, with the midpoint representing 18.6% year-over-year growth. Also, the company’s adjusted EBITDA could grow by over 10% this year.
Investors takeaway
The Federal Reserve of the United States has continued to raise interest rates to fight inflation. The rise in interest rates has increased borrowing costs, thus weighing on growth stocks. So, despite the recent surge, WELL Health trades at over 50% discount compared to its 2021 highs. Further, its valuation looks cheaper, with its next 12-month price-to-sales and price-to-earnings multiples at 1.6 and 16.1, respectively.
So, given its long-term growth prospects and attractive valuation, I am bullish on WELL Health, despite the near-term volatility due to a weaker economic outlook.
