Growth stocks have the potential to generate outsized gains for long-term investors. For instance, since its IPO (initial public offering) in 2016, Well Health (TSX:WELL) stock has returned over 4,000% to shareholders. It suggests a $1,000 investment in WELL stock in 2016 would be worth $41,500 today. Comparatively, a similar investment in the TSX index would be worth less than $2,000 today.
However, a volatile stock market has also driven valuations of growth stocks lower in the past 20 months. Despite its market-beating gains, WELL stock is down 55% from all-time highs, valuing it at a market cap of $985 million.
While Well Health stock has delivered exponential returns to shareholders, let’s see if the TSX stock remains a compelling bet for investors at its current valuation.
Is Well Health stock a good buy right now?
Well Health aims to leverage the power of technology to disrupt the legacy healthcare segment and improve patient outcomes. It is focused on improving efficiencies for healthcare providers by providing a robust practitioner enablement platform.
The company offers a comprehensive end-to-end healthcare system in Canada. It is the largest outpatient medical clinic owner-operator in the country, and its portfolio of services includes primary care, specialist care, allied care, and diagnostics.
Well Health provides two-way access to records, which results in better communication outcomes for patients and healthcare providers. The company targets high-cost structures in clinics with its expertise in technology, leading to higher profits and cash flows.
Moreover, healthcare providers spend 50% of their time on manual, non-digital tasks which can be automated. Around 50% of providers attribute burnout to manual tasks, which include paperwork and charting. Further, 55% of providers claim their individual time with patients has declined over time due to admin-related tasks.
Well Health also provides omni-channel healthcare solutions in the U.S. For example, it is among the largest providers of anesthesia services to gastroenterologists and has a presence in 48 states south of the border.
Well Health has successfully provided solutions to target industry-wide issues, allowing the company to increase sales from $32.8 million in 2019 to $569 million in 2022.
What is the target price for Well Health stock?
The healthcare disruptor has focused on highly accretive acquisition to grow its top line and gain traction in the U.S. Well Health continues to grow at an enviable pace and reported revenue of $171 million with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $27.8 million.
The company surpassed one million patient visits for the first time in the June quarter and ended the second quarter with 5.9 million patient interactions on an annualized run-rate basis. Well Health’s subsidiary OceanMD also signed a $38.5 million multi-year contract to provide e-referral and e-order tech services in British Columbia.
It is now forecast to end 2023 with revenue between $740 million and $760 million. This expansion in revenue should allow Well Health to improve profitability. Analysts expect adjusted earnings to improve from $0.05 per share in 2023 to $0.13 per share in 2024.
Well Health stock is priced at 1.2 times forward sales and 32 times forward earnings, which is very cheap for a growth stock. Analysts remain bullish and expect shares to almost double in the next 12 months.
