Spring Sale
2024 has been somewhat of a comeback year for Well Health Technologies Corp. (TSX:WELL). Yes, the company’s financial results have been breaking records for 22 quarters. But Well Health’s stock price faltered in 2021 and is down 53% since then. What’s going on with this Canadian stock?
Today, we’re seeing a recovery in Well Health’s stock price. Up 23% from its 52-week lows, is Well Health still worth buying? Let’s explore.
The momentum continues at Well Health
As I mentioned at the outset of this article, Well Health just reported its 22nd consecutive record-breaking quarter. That sounds pretty positive, but let’s take a look at the details in order to drive home the point that momentum is strong.
Firstly, we have the company’s revenue performance, strong by any measure. In 2020, just four or so years ago, Well Health reported revenue of $50 million. In 2023, Well Health reported revenue of $776 million. That’s 1,452% higher for a compound annual growth rate of 149% during this time period. In Well Health’s latest quarter, revenue came in at $243.1 million, or close to one billion on an annualized basis. The momentum in revenue is clear.
Secondly, Well Health has also made excellent progress on its profitability. For example, in 2023 net income came in at $16.6 million. This was followed up by net income of $12.3 million and free cash flow of $8.7 million in its latest quarter. Earnings per share of $0.48 blew past expectations that were calling for break-even, and compared to a loss of $0.03 in the same period last year.
Well Health looks to extract value for the stock
The company has a complex business, with many business lines in both Canada and the United States. In Canada, Well Health has its booming patient services business that includes its primary care business and its diagnostics business. In the U.S., Well Health has its U.S. patient services businesses. These businesses all continue to perform extremely well, yet as management puts it, Well Health stock does not reflect the sum-of the-parts valuation of the entire company.
Therefore, the company is looking to extract this value by exploring strategic alternatives for its U.S. businesses. For example, the company is looking to divest of Circle Medical, Well Health’s national U.S. telehealth provider. In July, Circle Medical reported a 65% increase in revenue, as this business continues to see momentum.
Well Health believes that the stock is being discounted by up to $1 billion due to the conglomerate discount. The cash received from the spin offs and/or divestments would be invested into the Canadian primary care market, as there continues to be enormous opportunity there. It would also be used to improve the balance sheet.
A focus on shareholder value to drive this Canadian stock higher
At the end of the day, management’s focus is on shareholder value creation and per share growth. 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, revenue per share came in at $0.16 in the first quarter (Q1) of 2021. In Q2 2024, it came in at more than $1.00.
The bottom line
The momentum at Well Health continues. This momentum is supported by strong demand for Well Health’s products and services that are dramatically improving healthcare. I expect this to continue and for Well Health stock to continue its ascent higher.
