Last month, Statistics Canada reported Canada’s inflation in June came in at 2.8%, which was lower than analysts’ expectation of 3%. It was the lowest since March 2021. The decline in energy and telecommunications services prices dragged inflation numbers down. However, food and mortgage prices rose during the month.
With inflation showing signs of slowing down, recession fears have eased, thus driving the equity markets higher. The S&P/TSX Composite Index rose 2.3% last month. Meanwhile, WELL Health Technologies (TSX:WELL) has remained flat. However, it is trading around 66% higher for this year. So, let’s assess whether investors can buy WELL Health at these levels by looking at its first-quarter performance and growth prospects.
WELL Health’s first-quarter performance
WELL Health reported a solid first-quarter performance on May 12, with its revenue growing by 34%. Impressive organic growth of 21% and strategic acquisitions drove its financials. Meanwhile, the company witnessed robust growth across its three segments, with the revenue from Canadian Patient Services, United States Patient Services, and SaaS and Technology Services growing by 23%, 38%, and 47%, respectively.
The company had around 1.4 million patient interactions during the quarter at an annualized rate of 5.6 million. Amid the top-line growth, the company’s gross profits increased by 24% to $86.2 million. Also, it generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $26.7 million, representing a 14% growth from its previous year’s quarter. Its adjusted net income grew by 58.4% to $14.1 million. It lowered its net debt-to-adjusted EBITDA ratio from 3.5 to 2.6, which is encouraging. Now, let’s look at its growth prospects.
WELL Health’s growth prospects
The telehealthcare services market is expanding amid the development of new innovative products and the growing penetration of internet services. Several market research enterprises are projecting the North American telehealthcare services market to grow in double digits for the rest of this decade, thus expanding the addressable market for WELL Health.
Meanwhile, the company is looking at expanding its footprint through strategic acquisitions. It recently acquired CarePlus Management, which offers recruitment and billing services in the United States. After completing the acquisition, the company’s management raised its 2023 revenue guidance by $50 million to $740-$760 million.
Meanwhile, the company is also considering expanding its presence in the United States and has signed an agreement with MCI Onehealth to acquire its clinic assets. These clinics could contribute $21 million of revenue next year while generating positive adjusted EBITDA. The company is also investing in MCI’s artificial intelligence-focused data science business. Further, the company has launched an artificial intelligence investment program focusing on developing innovative applications and tools. These growth initiatives could boost its financials in the coming quarters.
Investors’ takeaway
After a challenging 2022, WELL Health has witnessed solid buying this year, with its stock price rising by 66%. Despite a substantial increase in its stock price, the company still trades at 15.5 times analysts’ projected earnings for the next four quarters, which looks cheap considering its high growth prospects. So, considering its healthy outlook, attractive valuation, and improving investors’ sentiments, I am bullish on WELL Health.
