WELL:CC - Up More Than 50%: Is WELL Health a Buy at Today's Price?
Last year was tough for WELL Health Technologies ( TSX:WELL ), as it faced substantial capital erosion amid inflationary pressure, rising interest rates, and an uncertain economic outlook. However, since the beginning of this year, the company has witnessed healthy buying amid easing inflation and lower interest rate hikes by the Federal Reserve of the United States. WELL stock is trading around 50% higher for this year. Despite the recent rise, the stock trades at a 56% discount from its all-time high. So, let’s evaluate whether the rally can continue.
First, let’s look at WELL’s performance in the third quarter of 2022.
WELL Health’s third-quarter performance
Despite challenging market conditions, WELL Health continued to drive its financials in the November-ending quarter, with its revenue growing by 47% year over year. Along with acquisitions, organic growth of 18% drove its sales. The virtual services segment delivered a solid performance, with its revenue growing by 191%. Meanwhile, the revenue from its omnichannel segment rose by 15%.
Along with top-line growth, the company’s gross margin expanded from 50.3% to 53.6% amid higher contributions from higher-margin virtual services. Revenue growth and expansion of gross margins increased its adjusted net income by 49.8% to $14.8 million. It also generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $27.5 million. The company closed the quarter with cash and cash equivalents at $52.4 million, thus allowing it to fund its growth prospects.
Notably, yesterday, WELL Health’s management provided preliminary data on patient visits during the fourth quarter. The company achieved a record 991,268 omnichannel patient visits during the quarter, representing 42% growth compared to the previous year’s quarter. In 2022, the company had 3.5 million omnichannel patient visits, representing year over year growth of over 50%.
Now, let’s look at its long-term growth prospects.
WELL Health’s growth prospects
The pandemic accelerated the adoption of telehealth services. The market continues to grow with the increased penetration of internet services and development of innovative product offerings. Grand View Research projects the global telehealth market to grow at a CAGR (compounded annual growth rate) of around 24% for the rest of this decade.
Meanwhile, WELL Health is expanding its footprint in Canada and the United States to strengthen its market share. In November, the company acquired primary care clinics and Cloud Practice, an electronic medical records and practice management software, of CloudMD Software & Services. Earlier, it had acquired Grand Canyon Anesthesia and took a majority stake in West Florida Anesthesia Associates, expanding its service to 18 U.S. states.
These growth initiatives could boost the company’s financials in the coming years. Looking forward, WELL Health’s management projects its revenue run rate to reach $700 million by the end of 2023. Notably, the company has maintained its profitability despite its recent acquisitions, which is encouraging.
Riding the telehealth wave
Despite the recent increase in its stock price, WELL Health trades at an attractive valuation, with its NTM (next 12 months) price-to-sales and price-to-earnings multiples standing at 1.6 and 16.9, respectively. So, considering its healthy financials, growth prospects, and attractive valuation, I expect WELL Health’s rally to continue.
The post Up More Than 50%: Is WELL Health a Buy at Today’s Price? appeared first on The Motley Fool Canada .
Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2023