3 Reasons I’m Buying WELL Health Stock Today

With WELL Health consistently growing its sales and profitability while continuing to lose value, it’s one of the best stocks to buy now.

| More on:
tech and analysis

Image source: Getty Images

As many savvy investors know, these temporarily volatile and highly uncertain market environments can make for great buying opportunities for investors. Plenty of high-quality stocks with years of growth potential, such as WELL Health Technologies (TSX:WELL) stock, trade unbelievably cheap.

And while it can be difficult to put your hard-earned money to work when there is so much uncertainty and talks of a recession on the horizon, being able to see the bigger picture and potential these stocks have to rally when markets do eventually turn around is crucial, in order to take advantage of the opportunity.

One of the biggest problems with this environment, though, is that with so many stocks trading at compelling valuations, investors can be overwhelmed with choice, making it difficult to decide exactly which stocks are some of the best to buy.

So here’s why WELL Health is one of the best stocks to consider now, and three reasons why I continue to build my position in the high-potential healthcare tech stock.

WELL Health stock continues to grow rapidly

While other businesses are seeing their revenue impacted in this economic environment, WELL continues to grow at an impressive rate.

Of course, it’s no longer making the same number of acquisitions each year as it did at the height of the pandemic, but it continues to see higher patient visits and more organic growth, which is not necessarily surprising, given the convenience it offers patients as well as the essential nature of the healthcare industry.

And this continued growth is now leading to more and more profitability for the small-cap stock. In its most recent earnings report, for the third quarter of 2023, WELL once again beat sales estimates.

Canadian Patient Services revenue of $57.8 million was up 27% year over year. U.S. Patient Services revenue of $130.7 million was up 52% year over year. And WELL’s total revenue is now 40% higher than it was last year and up 20% quarter over quarter.

Furthermore, WELL Health stock also increased its guidance for 2023 and introduced 2024 guidance, which points to another 17.5% expected increase in sales over the next 12 months.

The healthcare sector is essential to our economy

While some growth stocks may have more risk in this environment due to the impacts they face as the economy worsens, WELL is in a much better position since the healthcare sector is essential.

This not only means there is less risk that WELL could see a significant impact on its operations, but it also means that it could continue to see rapid growth in the near term while many others struggle.

This is one of the main reasons why I continue to build my position in WELL Health despite growing uncertainty in the stock market.

WELL Health stock is trading significantly undervalued

Finally, the third and most important reason why I’m looking to buy WELL Health stock now is that it’s trading unbelievably cheap. With WELL trading at around $3.80 a share, it’s over 35% off its 52-week high and trades at just 1 times its forward sales.

For comparison, its one- and three-year average forward price-to-sales ratios are 1.4 and 3.3 times, respectively. That’s not all, though.

With WELL now focusing on growing its profitability as well as its sales, the stock trades at a forward price-to-earnings ratio of just 13.3 times and a forward enterprise value-to-earnings before interest, taxes, depreciation and amortization (EV/EBITDA) ratio of just 10.9 times. Both are extremely cheap valuations for a small-cap tech stock with significant long-term growth potential.

And although you should never base your investment solely on what analysts think, it can be helpful to check in on how they view the company. And unsurprisingly, a high-quality stock like WELL has a tonne of analyst love.

Right now, of the eight analysts that cover WELL, there are seven buy ratings and one sell rating. Furthermore, its average analyst target price of $8.36 is a more than 120% premium to where WELL Health stock trades today.

So if you’re looking for a high-potential growth stock to buy now, WELL Health is one of the cheapest stocks on the market today.

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

TFSA and coins

TFSA Investors: 3 Incredible Stocks for 2024

Are you looking for stocks to buy and hold for years for your TFSA? These three stocks could deliver exceptional…

Read more »

A person looks at data on a screen
Stocks for Beginners

3 Warren Buffett Stocks to Hold Forever

Warren Buffett sold some shares in Apple (NASDAQ:AAPL), and the market had questions.

Read more »

Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »

A bull outlined against a field

After Earnings, I’m Bullish on These 2 TSX Stocks

Given their solid performances and healthy growth prospects, I am bullish on these two TSX stocks.

Read more »

Woman has an idea
Bank Stocks

3 No Brainer Bank Stocks to Buy Now for Less Than $1,000

Canadian bank stocks like Toronto-Dominion Bank (TSX:TD) appear quite cheap today.

Read more »

Dividend Stocks

Where Will Canadian Utilities Stock Be in 5 Years?

Canadian Utilities (TSX:CSU) is a classic example of a stock where the dividend is all you get. Can the company…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 Stocks I’m Watching for Big Passive Income

Consider Bank of Nova Scotia (TSX:BNS) and another top passive-income play to power your dividend portfolio!

Read more »