Investing in companies that are part of rapidly expanding addressable markets is an excellent strategy for generating market-beating returns over time. In 2025, Canadian investors with a long-term horizon should consider gaining exposure to companies that operate in the artificial intelligence (AI) segment, which is forecast to expand from US$280 billion in 2024 to almost US$2 trillion in 2030.
With a market cap of $382 million, Healwell AI (TSX:AIDX) is one such company positioned to deliver outsized gains to shareholders in the upcoming decade.
HealWell AI develops AI-driven clinical decision support systems and healthcare analytics across multiple segments. It offers technology-enabled disease screening, electronic health records, healthcare data management, and clinical research services to pharmaceutical companies, healthcare providers, and hospitals.
Is this top AI stock a good buy right now?
In the fourth quarter (Q4) of 2024, Healwell AI delivered record quarterly revenue, reporting sales of $15.2 million, an increase of almost 700% year over year. Comparatively, gross margins stood at $7 million, up close to 1,180% from the year-ago period. Its gross margins improved from 28% to 48% over the last 12 months, driven by a shift toward higher-margin AI and software businesses.
“It’s incredible to reflect on what a transformative year it’s been for Healwell AI,” said CEO Dr. Alexander Dobranowski on the earnings call. “Just a little over a year since our launch, we have made significant strides in building what is now a leading healthcare software and artificial intelligence company.”
Healwell recently closed the acquisition of Orion Health, which should add $25 million in quarterly revenue and significantly improve profit margins. Orion Health provides data analytics and interoperability solutions to over 70 commercial stakeholders worldwide, impacting more than 150 million patient lives.
Healwell has seen substantial growth in its AI business, with its AI and Data Science segment revenue jumping 3,646% year over year in Q4. It now has master service agreements with 30 life sciences partners, including seven of the top ten global pharmaceutical companies, up from 12 MSAs a year ago.
For 2025, Healwell expects its AI and Data Science segment revenue to double, while its Healthcare Software segment will approach $100 million annually with Orion Health’s contribution. The Clinical Research and Patient Services segment is projected to grow by about 50%.
Healwell has bolstered its financial position through recent equity and debt financing. It completed a $25.5 million bought-deal equity financing, $30 million convertible debt financing, and a $50 million credit agreement with Scotiabank and RBC.
“The time is now to plant our flag as a leader in healthcare AI, not just in Canada but also from a global perspective,” Dobranowski said, highlighting the company’s optimism for continued growth through organic expansion and strategic acquisitions.
What is the target price for this TSX stock?
Analysts tracking Healwell AI expect sales to increase from $39 million in 2024 to $270 million in 2028. Its free cash flow is forecast to grow to $28 million in 2028, up from an outflow of $26.3 million in 2024.
If the TSX stock is priced at 20 times forward FCF, it will be valued at a market cap of $560 million within the next three years, indicating an upside potential of almost 50% from current levels. If it trades at 30 times forward FCF, the upside potential will be closer to 120%. Analysts remain bullish on the AI stock and expect it to gain over 140% over the next 12 months, given consensus price targets.
