Is It The Perfect Time To Consider Buying WELL Health Technologies?

Leading telehealth operator WELL Health Technologies has been investing heavily in its digital platform and enhancing its portfolio by adding key acquisitions to capitalize on the increasing demand for telemedicine and other areas of healthcare, like allied care, digital health apps, cybersecurity services, physician billing automation and electronic medical record services. Although the stock has lost a little value lately due to market turbulence, and not because of the company’s financial performance, growth trajectory, disciplined and accretive capital allocation focused business model or proven management team. Turbulence in markets is the primary culprit likely leading many to believe that the company’s shares can be purchased at a discount currently. We believe it may be an ideal proposition now. Read on.

Omnichannel digital health company WELL Health Technologies’ (TSX:WELL) stock price has rallied 173.6% over the past year, on the back of aggressive expansion plans undertaken by the company and soaring demand for healthcare innovators. The leading telehealth provider in Canada has recorded triple-digit revenue growth in the first quarter of 2021, primarily attributable to increased software and services revenue, as well as, strategic acquisitions during the past year. The company’s telehealth program has also contributed significantly to this growth.

As the healthcare giant has gradually transformed its business model by leveraging technology to enable millions of healthcare providers to deliver improved outcomes, WELL is uniquely positioned to capitalize on the booming digital healthcare market. The stock has declined 2.7% over the past month. But given its solid growth prospects and exceptionally strong financial position, we believe it will regain its momentum soon.

Here’s why we think it might be the right time to scoop up WELL:

Strategic Acquisitions Could Diversify Revenue Stream

WELL is a highly acquisitive company. In 2020, WELL acquired 14 digital healthcare businesses and made investments in two additional startups. Thus far, in 2021, WELL has 8 announced transactions including the acquisitions of ExecHealth, OpenHealth, Ardacare and Intrahealth. They expanded to new multiple markets outside North America, and acquired two new EMR companies.

Last month, WELL completed the acquisition of all of the issued and outstanding common shares of CRH Medical Corporation, a previously NYSE and TSX listed company. This acquisition represents a transaction value of approximately $372.9 million and a massive US expansion. The business combination should not only solidify WELL’s position in the North American telehealth and digital healthcare market, but open up ample revenue generating opportunities for the company in the US to compliment it already very strong Canadian businesses.

CRH has also demonstrated M&A strength. In fact, this month, CRH, which is now a subsidiary of WELL, acquired an 85% stake in New England Anesthesia Associates LLC, an anaesthesia services provider. We believe this should significantly boost WELL’s growth and further strengthen its footprint in the healthcare market.

First in Canada to Offer Health Records on iPhone

This month, the company started offering Health Records on iPhone through its Tia Health platform, becoming the first telehealth service provider in Canada to support the feature on iPhone. This would enable the patients to view and store their available health records in the Apple Health app on their iPhone or iPod touch, with their privacy protected. Also, this groundbreaking patient-centric feature should allow the company to better serve its customers.

Bullish Analyst Sentiment

There’s no doubt about the fact that analysts are bullish on the stock with all twelve analysts giving the company a Buy recommendation. The analyst consensus revenue estimate for 2021 is $234.8M, an incredible increase of 367% compared to $50.2M in 2020. The consensus Adjusted EBITDA estimate for 2021 is $48.6M, compared to an Adjusted EBITDA loss of $0.1M in 2020. Analysts are expecting next quarter, Q2 ending June 2021, to be exceptionally strong for WELL with consensus revenue estimate of $56.9M, a quarter-over-quarter increase of 122% compared to Q1 revenue of $25.6M, and a phenomenal 437% year-over-year increase compared to Q2 of last year.

Robust Financials and Profitability

WELL surpassed the CAD$100 million annualized revenue run-rate. Its revenue surged 150% year-over-year to CAD$25.6 million in the first quarter ended March 31, 2021. The company generated a software and services revenue of CAD$7.6 million, representing 345% improvement from the same period last year. Moreover, its adjusted gross profit rose 154.7% year-over-year to CAD$10.04 million. Also, WELL’s adjusted gross margin came in at 39.3% for this period, compared to 38.5% in the first quarter of 2020.

Also, the company’s profit margin looks solid. WELL’s trailing-12-month levered free cash flow margin of 13.2% is 295.3% higher than the industry average 3.3%. In fact, its asset turnover ratio of 0.4% is 11.1% higher than the industry average of 0.3%.

Stock Valuation

The company is trading at a reasonable valuation. WELL’s forward EV/Sales ratio of 5.42 is 14.1% lower than the industry average of 6.31. Also, its forward Price/Sales ratio of 6.90 is 8.1% lower than the industry average of 7.51.

Bottom Line

As the pandemic has bolstered the adoption of telemedicine and catalyzed the push to digitize healthcare, WELL’s share price is poised to make a big comeback. Given the company’s expanded telehealth offerings and strategic acquisitions, it could soon establish itself as the leader in the market. In fact, its relative undervaluation and solid financials should allow it to grow in tandem with the industry. As such, we think the stock is an ideal pick now.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes