Over the past few years, many high-quality Canadian stocks have traded cheaply due to the worsening economic environment and uncertain stock market landscape. However, while many stocks have recovered considerably by now, WELL Health Technologies (TSX:WELL) stock remains ultra-cheap.
The constantly changing economic environment has created a tonne of opportunities for investors in the last few years. First it was the pandemic making many stocks cheap. Then it was higher inflation weighing on companies before higher interest rates began to impact businesses across Canada.
Today, though, with inflation now cooling off and interest rates on the decline, many Canadian stocks that were once cheap have recovered. Therefore, it’s somewhat surprising that such a high-quality growth stock like WELL Health remains undervalued.
Now, though, with an improving market environment and a stock market that could begin to see a sustained rally in the coming months, does it make sense to buy WELL Health Technologies stock?
Why is WELL Health stock worth buying today?
WELL’s a stock that’s been on many investors’ radars ever since the pandemic. As a healthcare tech stock that offers telehealth services, it was one of the few businesses that thrived through the pandemic and saw significant growth in its operations.
However, even though it’s consistently grown both its revenue and now, more recently, its profitability over the last few years, the stock has continued to fall out of favour ever since the end of the pandemic.
In fact, its share price has declined by over 42% in the last three years. Meanwhile, over that stretch, its sales have grown from just $116.8 million three years ago to more than $910.4 million in the last 12 months, an increase of more than 679%.
WELL Health stock has not only grown its sales at an impressive pace over the last few years but also built a much stronger, more diverse business.
On top of its telehealth apps and healthcare technology businesses, WELL is also now the largest owner/operator of outpatient clinics in Canada, and it continues to acquire more locations to help scale costs and improve profitability.
Furthermore, it was also an early investor in AI tools that service the healthcare industry, which have exploded in popularity over the last year.
Plus, WELL is now even looking at spinning off some of its technology businesses as it looks to continue to create value for shareholders.
Therefore, the fact that it continues to trade so cheaply is definitely surprising, especially since WELL Health stock isn’t just growing its business rapidly. It also has a more than four-year streak of consistently beating analyst estimates each quarter.
How cheap is the healthcare tech stock?
While WELL’s revenue has grown considerably over the last three years, so too have its earnings per share (EPS). In fact, in 2021, WELL first turned profitable and earned $0.08 in normalized EPS. Meanwhile, this year, analysts expect its normalized EPS will be $0.26. Furthermore, analysts estimate another 20% increase in its normalized EPS next year to $0.31.
So with WELL Health stock trading at just over $4.30, at the time of writing, its current forward price-to-earnings ratio is 15.8 times. That’s considerably cheap for such a high-potential growth stock like WELL.
Furthermore, its forward price-to-sales ratio is now just 1.04 times, well below its three- and five-year averages of 1.5 times and 4.05 times, respectively.
Therefore, with WELL Health stock continuing to grow its sales as well as its profitability, and with the stock now trading as cheaply as ever, it certainly looks like an ideal time to pull the trigger. It’s only a matter of time before the stock gets the recognition it deserves and starts to see a significant rally back to fair value.
