3 Things About WELL Health Stock Every Smart Investor Knows

With WELL Health stock trading at just 13.4 times its expected earnings in 2024, is it one of the top investments on the TSX to buy now?

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With all the headwinds the economy has faced over the last year and a half, and now with all the uncertainty in the stock market, it’s essential that Canadians are investing for the long haul and ensuring the stocks they buy are some of the best of the best. That’s why WELL Health Technologies (TSX:WELL) stock is one of my top recommendations.

WELL is predominantly a tech stock that serves the healthcare industry. So, while it has the potential to see rapid and significant growth, it also operates in an industry that’s a lot more recession-resistant, making it an ideal investment today.

In fact, during the height of the pandemic, WELL was one of the most popular stocks in large part due to its digital health apps and telehealth businesses. Although the stock has actually continued to grow its sales and, even more importantly, its profitability, the share price has been declining since the pandemic ended.

So, if you’re looking to buy stocks for your portfolio in this environment and you have your eye on WELL Health stock, here are three things to keep in mind that every smart investor knows.

WELL Health stock has a tonne of growth potential

As I mentioned above, one of the most significant reasons for considering an investment in WELL Health stock today is that it’s an impressive growth stock with significant growth potential.

Right now, WELL owns a portfolio of digital health apps and telehealth businesses, in addition to being the largest owner-operator of outpatient medical clinics in Canada.

This diversification is key because it helps to mitigate risks. However, it’s also essential because it allows WELL to find synergies, which can help to both lower costs and promote revenue growth.

Since generating just over $300 million in revenue in 2021, WELL Health stock is already expected to report sales for 2023 that are more than double that, with analyst estimates pointing to revenue of more than $760 million.

Furthermore, analysts expect another 21% increase in revenue in 2024 and a 24% increase in normalized earnings per share (EPS).

So, while WELL’s share price continues to trade below $4, it’s certainly one of the best growth stocks to keep your eye on today.

WELL is making both acquisitions and dispositions to position itself for the future

One of the main reasons for WELL’s rapid and impressive growth, especially in the pandemic years, was its ability to make value-accretive acquisitions.

WELL did a fantastic job adding companies to its portfolio that could bring in new customers and expand its reach. However, it also did an incredible job finding businesses that had a tonne of organic potential themselves, which is what led to this impressive and consistent growth in sales.

Now, however, WELL Health stock has also been looking to sell off some of its non-core assets where it makes sense. For example, just last month, WELL sold off one of its smaller operations for $24 million after buying it for just $15 million in 2021.

So, although this deal is only a small fraction of WELL’s entire business, which is expected to have generated over $760 million in 2023, it shows that WELL is committed to focusing on its capital allocation and continuing to grow its Canadian medical clinic business.

WELL Health Stock is still unbelievably undervalued

Despite an impressive, albeit short-track record from WELL, and despite its consistent growth of both sales and profitability, WELL Health stock has remained ultra-cheap.

On a historical basis, WELL has averaged a forward price-to-sales ratio of roughly 2.4 times over the last three years. Meanwhile, today, it trades at just 1.0 times its forward sales, showing just how cheap it’s become.

Furthermore, with WELL trading at just $3.90 at the time of writing and with the stock expected to generate normalized EPS of $0.29 next year, the stock is currently trading at a forward price-to-earnings ratio of just 13.4 times, which is exceptionally cheap for a high-potential growth stock.

Therefore, if you’re looking for high-quality and undervalued stocks to buy now and hold for years, WELL Health is certainly one of the top investments to consider 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.

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