Valued at a market cap of $1.68 billion, Well Health (TSX: WELL) went public in 2016. Since its initial public offering (IPO), WELL stock has returned 6,630% to shareholders. So, an investment of $500 in the TSX stock soon after its IPO would be worth close to $33,500 today. Despite these market-thumping gains, Well Health stock trades 27% below all-time highs, allowing you to buy a quality company at a lower multiple. Let’s see if the Canadian telehealth stock is a good buy in 2025.
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Can WELL stock rebound in 2025?
Well Health operates a Practitioner Enablement Platform with two revenue models:
- Fully managed services for physicians at WELL-owned clinics
- Ala carte solutions for independent practitioners
In Canada, WELL is the largest operator of outpatient clinics with 181 locations across four provinces, offering healthcare services. The U.S. division comprises CRH (gastrointestinal care and practitioner recruiting), Circle Medical (primary care/mental health), and Wisp (women’s telehealth). The technology segment includes WELL Provider Solutions (EMR systems, billing services, digital health marketplace) and WELL Cybersecurity.
Over the years, the company has grown through strategic acquisitions. Its sales have risen from 5.9 million in 2018 to $776.1 million in 2023. In the last 12 months, revenue has grown by 36.6% year over year to $957.7 million.
Well’s business model aims to address challenges in Canadian healthcare, a $344 billion industry struggling with fragmentation, underinvestment, and technological limitations.
A strong performance in Q3 of 2024
WELL Health reported solid numbers in the third quarter (Q3) of 2024, with sales of $251.7 million, up 23% year over year. The Canadian Patient Services segment rose by 35%, while U.S. Patient Services and SaaS Technology Services grew by 21% and 19%, respectively, in the September quarter. Notably, Well Health surpassed $1 billion in annualized run rate ahead of schedule while patient visits grew by 41% to 1.5 million.
Well Health’s strategic initiatives include a pipeline of 17 pending acquisitions worth over $100 million in revenues. Moreover, the company has expanded its service offerings by launching weight care and GLP-1 programs in Canada and the U.S.
Well’s U.S.-based platforms, Wisp and Circle Medical, showcased robust performance in Q3 with 35% and 61% revenue growth, respectively, and are currently under strategic review for a potential sale.
What is the target price for Well Health stock?
Well Health’s management plans to continue its share buyback program while reducing debt and minimizing share dilutions. Further, it aims to maintain a strong financial position, enabling continued funding of organic growth and future acquisitions through operational cash flows.
Looking ahead, WELL has raised its 2024 revenue guidance to $985-995 million and remains focused on enhancing profitability. It implemented a cost-cutting program that contributed to record adjusted earnings before interest, tax, depreciation, and amortization of $32.7 million in Q3 of 2024. It also generated $16.2 million in free cash flow in Q3.
Analysts tracking Well Health forecast it will grow sales from $776 million in 2023 to $1.11 billion in 2025. Further, free cash flow is estimated at $83 million in 2025, up from $58.33 million in 2023. So, priced at 20.2 times forward FCF, Well Health stock is not too expensive and trades at a 25% discount, given consensus price targets.
