Is it Too Late to Buy Well Health Stock?

Well Health stock remains below $4, but as they keep beating records and the focus shifts to even higher returns, this could change fast.

Karen Thomas, MSc, CFA ❯

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published May 10, 2024 4:10 pm EDT

Well Health Technologies Corp. (TSX:WELL) reported its first quarter earnings this week. It was a strong result, mixed with a strong outlook that recently sent Well Health Technologies stock higher. In fact, it has rallied 11% in the last two days.

This might have some of you questioning whether it’s still a good time to buy. Let’s look into this.

Well Health reports record results once again

Simply put, the quarter was the 21^st consecutive quarter of record-breaking results. Revenue increased 36.7% to $231 million, with organic growth of 13.5%, as patient visits soared 34% versus last year. This was accompanied by a 6.1% increase in adjusted EBITDA to $28.3 million. Finally, adjusted EPS came in at $0.08 versus $0.06 last year, and versus consensus expectations that were calling for EPS of negative $0.04.

Yet again, Well Health is blowing past expectations and records. This is a testament to the strong need for Well Health’s services and solutions in the health care system. I would like to highlight the Canadian primary care market, which Well Health has singled out as one that offers significant growth.

Revenue for primary care increased 83% to $45.3 million in the quarter. This was due to the MCI acquisition and the new Manitoba clinics, along with 35% organic growth. To give us a sense of the opportunity here and the fragmentation of the market, let’s look at some details. Well Health has less than 1% market share in terms of physician spending and it’s still the largest player in the country.

A focus on shareholder returns

With this quarter, management has commented that they’ve hit an inflection point. As a result, they’ve made it their intention to focus more on shareholder value creation going forward.

This means focusing on optimizing and growing free cash flow generation, and reducing share-based compensation and share buybacks. Well Health posted an 11% increase in free cash flow per share in the quarter. Also, the company expects to generate 30% more cash flow this year versus last year.

Well Health’s outlook remains strong

I remain very positive on the stock as the business remains strong, as does the outlook. Management’s guidance for fiscal 2024 includes guidance for revenue of between $960 to $980 million, for a growth rate of between 23.7% and 26.3%. Also, free cash flow is expected to increase more than 30% to more than $50 million.

Back to Well Health Technologies’ stock price. As you can see from the graph below, the stock is up big in the last five years, but it’s down 57% from its 2021 highs.

Given the growth that we can expect from Well Health, I think that the stock is a bargain today.

The bottom line

In closing, I’d like to go over the thesis on Well Health’s stock price, which remains very strong. Strong, growing, and recurring revenue is a reflection of the strong demand for this company that’s transforming the health care industry through digitization, offering cost savings, time savings, greater efficiencies, and better doctor and patient satisfaction and care.