Investing in an IPO (initial public offering) could be a double-edged sword, as a company generally goes public to fund its expansion plans. So, you typically invest in a high-growth company that aims to expand at a rapid pace.
Investors can derive outsized gains following an IPO, especially if the management team executes flawlessly. Alternatively, IPO investing can also burn investor wealth if the company’s financials deteriorate or if it fails to meet expectations consistently.
One TSX stock that has delivered significant returns since its IPO is WELL Health (TSX:WELL). The company went public in 2016 and has since returned 4,690% in the last seven years.
It means an investment of $1,000 soon after WELL Health’s IPO would be worth around $47,900 today. Despite these market-thumping gains, WELL Health stock is down 48% from all-time highs valuing the company at a market cap of $1.12 billion.
Let’s see if WELL Health stock is a good buy at its current valuation.
The bull case for WELL Health stock
WELL Health is a practitioner-focused digital health company. It has successfully created an end-to-end healthcare system in Canada that is anchored by some of the largest networks of outpatient medical clinics in the country.
It aims to empower healthcare providers with tech-enabled solutions that positively impact patient care. WELL’s technology platform drives its clinic network in Canada, while in the U.S., the company delivers omnichannel healthcare services and solutions in specialized markets.
WELL Health’s portfolio of digital tools includes virtual care, waiting room automation, and precision medicine, which, in turn, facilitates a more accessible healthcare environment while reducing response times for vital services.
Over the years, Well has built a comprehensive practitioner enablement platform that unlocks value from revenue streams such as the following:
- Fully Managed Service: Here, physicians who practice at clinics operated by WELL Health will receive access to the full suite of products and solutions.
- A La Carte: Physicians who practice at non-WELL-operated clinics can pick and choose services offered by the company’s practitioner-enablement platform.
Well has built an end-to-end healthcare system comprising primary care, secondary care, allied health, and diagnostics. It owns and operates 85 clinics across Canada and provides tech-powered solutions to thousands of practitioners across the country.
These solutions include software, services such as Electronic Medical Records (EMR), practice management, billing, and cybersecurity. The WELL EMR Group serves over 3,500 clinics and 22,000 practitioners in Canada.
In the United States, WELL Health targets specialized verticals in health care, where it can leverage technology to enhance patient outcomes. It has acquired companies such as CRH Medical, WISP, and Circle Medical in recent years to gain traction south of the border.
While CRH Medical provides services to 127 ambulatory surgery centres, Circle Medical offers solutions in specialized markets, and WISP operates in the e-pharmacy solutions segment.
A look at WELL Health stock price and valuation
Analysts expect WELL Health to increase sales from $569 million in 2022 to $827.5 million in 2024. WELL stock is priced at less than two times forward sales, which is quite cheap for a quality growth stock.
It is also improving profitability and should report adjusted earnings of $0.05 per share in 2024 compared to a loss of $0.02 per share in 2023.
Analysts remain bullish on WELL stock and expect it to surge over 80% in the next 12 months.
