Well Health Stock Is Up 7% After Earnings: What Investors Need to Know

Well Health is benefiting from strong demand as it digitizes healthcare and strives to improve patient outcomes.

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Technology companies like Well Health Technologies (TSX:WELL) are changing the world for the better. As a result, demand is high and expectations are high. Well Health Technologies reported its first-quarter earnings, which were a reflection of this — Well Health Technologies’s stock price is therefore up 7% since.

Here’s what you need to know.

Well Health’s momentum remains strong

The first quarter was the 21st consecutive quarter of record-breaking results. Revenue increased 36.7% to $231 million, with organic growth of 13.5%, as patient visits soared 34% versus last year. This was accompanied by a 6.1% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $28.3 million. Finally, adjusted earnings per share (EPS) came in at $0.08 cents versus $0.06 cents last year and versus consensus expectations that were calling for EPS of negative $0.04.

Beyond this obvious strong momentum, the company signalled that it is now ready and able to focus more on shareholder returns. It’s what every investor wants to hear, and it comes right on time. This means making good use of its growing free cash flow. In the quarter, free cash flow increased 11%, and for the year, management expects free cash flow to increase 30% to $50 million.

Also, management has made a commitment to reduce share-based compensation as well as increase share buybacks, effectively reducing or eliminating dilution in Well Health stock.

The primary care market in Canada is a big opportunity for Well Health

In terms of future growth and opportunities, the primary care market in Canada is a big one for Well Health. This is because the market is a very large one, which is very fragmented, with Well Health having a mere 1% market share — and Well Health is facing little competition as of now.

In the first quarter, revenue from the primary care business increased 83% to $45.3 million. In 2024, management expects revenue of more than $300 million, which they expect to exceed $1 billion in the not-too-distant future. This assumes that Well Health has a 10% market share at that point.

So, as you can see, the opportunity is significant — and Well Health is getting there rapidly.

Artificial intelligence to power healthcare

Another really interesting aspect of Well Health’s story is the opportunity to use artificial intelligence (AI) to improve healthcare — from efficiencies to disease detection and management to patient care. Examples of this include AI Voice, for transcribing, effectively eliminating human error in the transcribing process as well as cost. There is also AI Inbox Administration, which is an automation software that automatically files faxes to charts.

These AI-enabled processes sound simple, but daily use of these will have the effect of reducing costs, increasing efficiencies, and lessening the workload so healthcare professionals can focus more on patient care.

But the most exciting potential of AI, is its ability to directly improve patient outcomes. For example, AI Decision Support acts as a co-pilot for the physician. It provides risk stratification, harnessing clinical data and AI to screen for and find patients at-risk for over 100 different chronic and rare diseases. This has the potential to improve patient outcomes by leaps and bounds.

The bottom line

As you can see from this article, I feel very optimistic about Well Health Technologies from many different angles. From the value of its business to the company’s improving financials, I think that Well Health is really in a sweet spot right now.

This will drive Well Health Technologies’s stock price significantly higher over the next few years, in my view.

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 Karen Thomas has a position 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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