Valued at $1.17 billion by market cap, Well Health (TSX: WELL) went public in 2016 and has since returned over 4,670% to shareholders, outpacing the broader markets by a wide margin. Despite its market-thumping gains, Well Health stock trades 48% from all-time highs, allowing you to buy the dip and benefit from outsized gains if investor sentiment improves.
Well Health has outpaced the TSX index in 2024, rising 24% year to date. Let’s see if WELL stock can continue to move higher and double shareholder returns in 2024.
Source: Getty Images
Is Well Health an AI play?
Well Health is a digital health company that uses technology to enhance patient experiences. In recent months, it has sought to leverage artificial intelligence (AI) capabilities to gain in key markets.
For instance, Well Health recently launched a new AI-powered physician co-pilot to assist cardiologists in better identifying patients at high risk of cardiovascular diseases. It has also partnered with Healwell AI, a leader in AI-enabled disease diagnosis, for this venture.
The co-pilot offering with cardiologists will be deployed into company-operated diagnostic centres, providing support and assisting doctors in more than 40 Ontario locations. Well Health emphasized that CVD is the leading cause of death globally, accounting for almost a third of total deaths in 2019, showcasing the critical need for early detection.
Additionally, Well Health and its consortium partners have been awarded the largest digital project to date for Health Compass II, an initiative that will continue the advancement of AI and interoperability in Canadian healthcare.
Well Health will be the lead commercialization partner and first customer while providing expertise and interoperability to each partner. Over a four-year period, the project will fund around a third of all project-related costs.
Strong revenue growth
Well Health reported revenue of $231.6 million in the first quarter (Q1) of 2024, an increase of 37% year over year. Organic sales growth stood at 13%, while acquisitions contributed to the rest. Well Health ended Q1 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $28.3 million, up 6% year over year. Its Canadian business was far more profitable, as EBITDA rose 19% to $14.6 million.
The company reported an adjusted net income of $20.2 million or $0.08 per share, 43% higher than the year-ago period. An expanding bottom line should help Well Health end 2024 with a free cash flow of $55 million, up from $42.4 million in 2023. It also expects to end 2024 with sales between $960 million and $980 million and EBITDA between $125 million and $130 million.
Is Well Health stock undervalued?
Given its cash flow estimates, Well Health trades at 21.3 times forward free cash flow, which is not too high. Going forward, Well Health should see a significant shift in profit margins as it benefits from economies of scale.
Analysts expect adjusted earnings to touch $0.13 per share in 2024, indicating a forward earnings multiple of 37 times. Bay Street remains bullish on WELL stock and expects shares to gain over 50% in the next 12 months.
While it’s unlikely that WELL stock will surge over 100% in 2024, it remains an enticing investment choice right now due to its expanding profit margins and acquisition-powered revenue growth.
