Why Well Health Stock Soared 14% This Month

Continued revenue momentum and increasing profitability should continue to boost Well Health’s stock price into the future.

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Well Health Technologies Corp. (TSX:WELL) has been rapidly changing the health care system as we know it. In fact, the technologies offered by Well Health have reduced wait times, improved family care office profitability, and ultimately elevated the level of care offered to patients. Not surprisingly, Well Health Technologies stock has been reflecting this success.

Here are the main reasons that Well Health’s stock price soared almost 12% this month.

The road to profitability

For those of us waiting for Well Health to turn a profit, the road may have seemed long. But consider this: Well Health went public in 2017. This is the year it all started. In 2023, only six years later, the company posted annual revenue of $776 million and net income of $16.6 million.

Last quarter, the company was decidedly optimistic about its profitability, as management stressed that this quarter signalled an inflection point. This means that we can expect increasing profitability as revenue continues to rise and reduced costs begin to take hold.

To sum this up with numbers, adjusted net income came in at $20 million in the company’s latest quarter. Earnings per share (EPS) came in at $0.08. This compares to net losses in the same quarter last year. So, with this newfound profitability, management can now afford to focus more on shareholder value creation.

Shareholder value creation coming to Well Health

A focus on shareholder value creation – this means focusing on optimizing and growing free cash flow generation, reducing share-based compensation, and initiating share buybacks. In this respect, things are progressing nicely.

For example, Well Health posted an 11% increase in free cash flow per share in the quarter. And, the company expects to generate 30% more cash flow this year versus last year.

Also, the company recently stepped up its share buyback plan. In fact, earlier this month, the company received approval to buy back 2.5% of its public float. This will reduce the number of shares outstanding, and therefore strengthen the company’s earnings per share.

Well Health: Looking ahead

The future continues to look very bright for Well Health and Well Health stock. In fact, the company is on a roll – 21 consecutive quarters of record-breaking results that continue to show momentum.

Management’s guidance for fiscal 2024 includes guidance for revenue of between $960 to $980 million, for a growth rate of between 23.7% and 26.3%. EPS is expected to come in at $0.17, compared to a net loss in 2023. Finally, looking ahead to five years from now, Well Health expects to continue to grow rapidly.

The company is the largest player in the industry, yet only holds a 1% market share of physician spending. This is evidence of the fact that the market is hyper-fragmented. And it’s a sign of the opportunity ahead for Well Health. Right now, there’s little competition for Well Health. The company estimates that it can increase its market share to 5% to 10% in the next five years.

The bottom line

Well Health Technologies’ stock price has rallied significantly this month. This follows a period of weakness and lacklustre share price performance. In fact, the stock currently trades 51% lower than its 2021 highs. In my view, this rally has real strength behind it, and Well Health stock is a buy.

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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