WELL Health Hints at NASDAQ IPO

WELL Health stock remains a top bet for both growth and contrarian investors right now.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the most popular stocks among analysts this year has been the digital health stock WELL Health Technologies (TSX:WELL). With a track record of innovation and big-ticket acquisitions, WELL Health is consistently brought up in value discussions.

Lately, the conversation has been even more interesting following WELL’s Q1 earnings call in which the company disclosed its engagement with renowned law firm Fenwick & West to help it with a U.S. IPO listing in Q4 of 2021. Fenwick is a high-profile name on Wall Street; it led Facebook’s IPO and its client base includes tech giants such as Amazon and Cisco. It was also involved in the recent IPO listing of Coinbase. With WELL’s American peers trading considerable multiples higher, investors have now been given a unique opportunity to get in early. 

WELL Health stock is grossly undervalued

WELL Health stock is valued at a market cap of $1.4 billion. This suggests its trading at a forward price-to-sales multiple of less than six, which is very reasonable given that analysts forecast the company to grow revenue by a staggering 367.5% year over year in 2021. Bay Street analysts also expect WELL Health to increase the top line by 40% to $329 million in 2022.

WELL stock is undervalued when you compare it with digital-health peers south of the border. For example, analysts expect Teladoc to post an earnings loss of US$0.91 per share. Comparatively, WELL Health is expected to improve its bottom line from a loss per share of $0.03 in 2020 to earnings of $0.08 in 2022.

We can see WELL Health is trading at a significantly lower multiple, despite the fact that it is expanding revenue and profit margins at a faster pace. This is being demonstrated in the technicals as well. We are seeing overall short interest and volume decrease, while the cost to borrow is increasing. Investors are quickly becoming aware of WELL Health, and they want a piece of it. 

What’s next for investors?

While the lower valuation of WELL stock is enticing, long-term investors should find comfort knowing that the company is also part of a recession-proof industry. The ongoing pandemic accelerated the adoption of digital health services, driving revenue growth at an astounding pace for WELL Health and its peers.

WELL Health is already the single largest chain of primary healthcare clinics in British Columbia, and its recent acquisition of CRH Medical will help the company gain traction in the U.S. as well.  The company has over 1,000 healthcare practitioners working in its lines of business, and it owns several significant telehealth and EHR platforms that position it to be top three in both telehealth and EHR categories in Canada.

CRH will be highly accretive to WELL Health as it is expected to generate sales of US$150 million and a free cash flow of US$40 million in 2021. Part of the CRH Medical acquisition included JP Morgan increasing its credit line by US$100 million to US$300 million, such that the company may continue to grow via M&A activity in 2021 and beyond.

We believe WELL is a unique and accessible opportunity for investors to acquire via its TSX listing in advance of the upcoming NASDAQ listing. WELL’s multiples are sure to grow, as it accesses the U.S. markets, where multiples are generally more than 50% higher than WELL’s current trading multiple. WELL will be favourably compared against similarly sized companies in the tech-enabled healthcare space. 

Should you invest $1,000 in Andrew Peller right now?

Before you buy stock in Andrew Peller, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Andrew Peller wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,391.46!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/7/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. David Gardner owns shares of Amazon and Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of and recommends Amazon, Facebook, and Teladoc Health and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Tech Stocks

Canada day banner background design of flag
Tech Stocks

Invest in These 3 Unstoppable Canadian Stocks for the Next Decade

Looking for some Canadian stocks that could continue an unstoppable upward trajectory? Here are three to look at for 2025.

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

The Best AI Stock to Invest $1,000 in Right Now

Taiwan Semiconductor Manufacturing is an AI stock that is poised to deliver market-beating gains to shareholders in 2024 and beyond.

Read more »

cloud computing
Tech Stocks

2 TSX Technology Stocks Set to Dominate in 2025

Global supply chain complexities amid tariff concerns could help these two TSX tech stocks soar in 2025 and beyond.

Read more »

how to save money
Tech Stocks

The Smartest Growth Stock to Buy Right Away With $5,000

If you want a growth stock, you want a company that has a stable path forward. So, let's look into…

Read more »

dividends grow over time
Dividend Stocks

These 3 Canadian Stocks Could Triple in 5 Years

These three Canadian stocks are in a prime position for future growth. But some patience may be needed along the…

Read more »

chip with the letters "AI" on it
Tech Stocks

2 Top Canadian AI Stocks to Buy in January

Here's why Kinaxis (TSX:KXS) and Docebo (TSX:DCBO) look like two top Canadian AI stocks worth buying to kick off 2025.

Read more »

Data center servers IT workers
Tech Stocks

1 Canadian Stock Ready to Rise in 2025

This Canadian stock is ready to surge in 2025, and now is the time to buy.

Read more »

cryptocurrency, crypto, blockcahin
Tech Stocks

Earn an 11% Yield With This Bitcoin-Focused ETF

This ETF converts the high volatility of Bitcoin into above-average monthly income.

Read more »