Economic uncertainty always exists. And each time we’re in an elevated period of economic uncertainty, it seems like this time is different. But the fact is that economic uncertainty is the norm. Whether we realize it at the time or not, it is always present. This is why I always like defensive growth plays. Canadian healthcare stock Well Health Technologies (TSX:WELL) is my favourite one today.
Please read on as I go over the reasons for my positive outlook for this healthcare stock that’s rapidly growing.
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Well Health stock: volatile but defensive
I’d like to start off by pointing out that at first glance, it might appear that Well Health Technologies stock is not defensive at all. If we look at a graph of its stock price, we can see why one could easily arrive at that conclusion.
But I would caution against that because that would potentially eliminate this stock from consideration. The fact is that Well Health is a company that is in the beginning stages of its growth. This means that, by definition, there will be some heightened volatility and uncertainty. It’s the normal growth process even of companies that are, by their very nature, defensive, like Well Health Technologies.
A growth stock in a defensive industry
Since 2020, Well Health has grown its revenue by 1,700% to $920 million in 2024. Although the company was still operating at a loss in its latest quarter, cash flows are increasing, setting the stage for further growth.
Well Health develops technology, services, and support functions in pursuit of its mission to tech-enable healthcare providers. Demand for this has been booming and continues to be exceptionally strong. Understandably, the healthcare industry is in dire need of the efficiencies that Well Health offers in order to improve care, reduce costs, and lessen the burden.
The biggest issue for Well Health has been focusing and consolidating its business. Demand has been booming from the start, but in an emerging industry, we should always expect there to be growing pains.
In Well Health’s case, this has manifested in its struggle to maintain positive earnings. In its latest quarter, revenue increased 32% to $294.1 million, driven by organic growth and acquisitions. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 36% to $27.6 million. Yet, the company posted a net loss of $41.9 million. The good news is that this loss was due to one-time issues. Adjusted net income was $7.5 million. Excluding all one-time events, net income improved by $2.6 million versus last year.
This is messy. It causes investors to understandably shy away from a stock. But let me tell you more of the facts that lead to my bullish view on this Canadian healthcare stock that’s bringing technology to the healthcare sector.
Upcoming divestitures and a clear focus
Well Health’s strategy is to divest its care delivery clinics in the U.S. within the next two years. This means that the company’s Circle Medical and WISP businesses are up for sale. With the proceeds of these sales, Well Health will have a clear focus, concentrating on the following four areas: its Canadian clinic network, Well Star, Cyberwell, and Healwell.
The Canadian clinic network is Well Health’s primary focus. This network currently consists of 220 Well Health-owned clinics, which is only 1% of total clinics. Hence, the opportunity here is large. Well Health’s goal is to capture 10% of the market, which equates to more than $5 billion in revenue. The Canadian clinic network currently generates $500 million in annual revenue for Well Health.
Other areas of focus include Well Star, which is a provider of tech solutions, CyberWell, which provides cybersecurity, and HealWell, which is using artificial intelligence and data science in order to improve disease detection, management, and care.
The bottom line
Healthcare spending is as defensive as it gets. Spending on technology to make everyone’s life easier and better in the healthcare realm is also as defensive as it gets. Well Health Technologies is gearing up to do all that and more. It is my defensive growth stock of choice.
