Growth stocks offer the potential of extraordinary returns. But investing in growth stocks should be done with caution, as a higher risk profile usually accompanies this higher return potential. While many growth stocks are constantly in the news, there are others that fly beneath the radar. They offer investors the chance to buy before the market becomes aware of their potential, and before their stock prices reflect this.
In the article, I’ll discuss Canadian growth stock Well Health Technologies Corp. (TSX:WELL), a technology company focused on the healthcare space.
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Well Health posts extraordinary growth
In a journey that has been relatively quick and exciting, Well Health has continued to prove its value proposition. The company’s growth journey has included an acquisition-intensive capital-allocation program. As a barometre for the value creation of this program, let’s look at the multiples at which these deals were made and the value created.
The acquisitions were made at an average price-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 9.4 times. Since the deals, Well Health has grown EBITDA for these businesses by 101%. This means that the actual EBITDA multiple of these deals shrinks to just 4.7 times. The value creation for both the business and shareholders is evident.
In the last five years, the company’s revenue has increased by more than 1,700% to $920 million in 2024. This has been accompanied by sharp rises in profitability and cash flows. In Well Health’s most recent quarter, earnings per share (EPS) came in at $0.10, and its free cash flow increased 34% to $11.7 million.
Significant growth ahead
Well Health’s Canadian primary care business is the focus of the company at this time. This is driven by the projected growth in this business, which is extremely healthy. There are a few factors at play here. Firstly, this is a very fragmented market. In fact, Well Health’s footprint is larger than the next five combined, but Well Health’s market share is less than 2%.
Secondly, Well Health is seeing accelerating growth in this business. Simply put, doctors are embracing the company’s tech-enabled healthcare delivery. This is because it increases efficiency, frees up time for doctors, and improves the care of their patients. Last quarter, Well Health’s Canadian clinics segment saw a 76% increase in EBITDA to $23 million. This compares to a growth rate of 19% in the prior year.
Well Health stock: Getting ready to shine
As I’ve touched upon previously in this article, Well Health is not only continuing to drive strong top-line results, but it’s also increasing profitability and returns. Looking ahead to the full year 2025, management’s guidance is calling for revenue growth of between 52% and 58%, 25% EBITDA growth and EPS of $0.22 versus $0.13 last year.
Well Health Technologies stock is currently trading at $5.47, or 25 times this year’s expected earnings and 18 times next year’s expected earnings. The long-term growth outlook for Well Health remains very bullish, with its Canadian business expected to grow significantly, to over $600 million in revenue within two years and $100 million in EBITDA. This compares to revenue of $319 million in 2024 and EBITDA of $41 million.
The bottom line
Well Health’s growth profile, past and present, is nothing short of spectacular. Yet, Canadian investors are overlooking this stock. The rest of us who are noticing Well Health’s consistently strong growth profile have the opportunity to buy the stock at levels that I believe don’t reflect the massive growth that’s ahead.
