A Few Years From Now, You'll Wish You Bought This Undervalued Stock

A Few Years From Now, You’ll Wish You’d Bought This Undervalued Stock

A modestly undervalued stock with decent growth momentum may not be compelling to some investors. However, its business model and prospects can make it a top pick.

Adam Othman

Adam is a value investor who is always on the hunt for fantastic undervalued companies that he can share with Motley Fool readers. He follows Warren Buffett and Charlie Munger's investment advice and has completed the Canadian Securities Course. When he's not investing, Adam can usually be found traveling or skiing.

Published November 7, 2024 3:45 pm EST

| More on: WELL

There are stocks you wish you had bought when you had the time and stocks you wish you had avoided. It’s in human nature to regret both kinds of decisions. But it’s important to remember that not all opportunities are worth taking.

Still, some are, and one of them is a medley of undervalued stocks with decent growth momentum. It may not be compelling to some investors, but its business model and future prospects can make it a top pick.

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The stock

WELL Health Technologies (TSX:WELL) is undervalued, especially compared to other health stocks in the mid-cap range, but not by a significant margin. The price-to-earnings (P/E) ratio is 7.9, but most other ratios are at a fair level. The discount is equally modest—8% from its yearly peak.

The discount and undervaluation are attractive reasons to consider this stock, but not the reason you might regret not buying it in the future.

The stock has other good things, such as steadily growing revenue (year over year). It didn’t do well in terms of net income in the past, but the last quarter was much better. The company has debt but a reasonable amount, assuming its finances remain on the current growth track and the company manages them effectively.

The company

Now, the reason to consider this growth stock, which might also qualify as a tech stock, is its business model and reach. WELL Health offers a range of technological services to healthcare providers, enabling them to streamline their practice and extend their reach.

The services include telehealth, patient portal, and more. They are all compiled under the banners of omnichannel patient services and virtual services.

The company already provides services to over 37,000 practitioners, has an eco-system of 55 apps, and collectively caters to the needs of five million patients. It has healthcare providers in the fold as well, about 3,900.

Telehealth services aren’t a novel concept, but WELL Health does that more comprehensively than most comparable businesses. As healthcare becomes more digitized, WELL Health might be better positioned than most competitors to include cutting-edge technologies in its portfolio.

With artificial intelligence-powered diagnostics, wearable scanners, and several novel healthcare technologies developing in parallel, the company can emerge as a virtual health giant in a few years (assuming it keeps evolving rapidly).

This may cause the stock to shoot up at a compelling rate, and if you buy now, you can ride that momentum all the way to the peak.

Foolish takeaway

The stock has already gone through a massive growth phase. It rose almost 8,000% between 2016 and 2021. A repeat performance might be too ambitious, but if the company reaches its full potential, the growth might be pretty significant.

It’s not paying dividends now, but once its income reaches a certain threshold, the company might start doing that as well. That would be another benefit of investing in it now.