WELL Health Technologies (WELL.TO)

In regards to WELL's business update we think it provided a positive development. Two Canadian clinics were added in Q4 generating approximately $28 million in annualized revenues for total consideration of less than $400,000 and are expected to positively contribute to EBITDA in 2024. We like this news and should help WELL's Q4 earnings. Additionally, the company is focussed on improving cost efficiencies and is making progress in pursuing oppurtunities in its pipeline. We like WELL as a small cap name that is displaying growth and operates in a fast growing niche. 
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He doesn't follow this. They aren't earning money now, not positive yet. Has no reason to buy it, but he doesn't know this industry well.

He is not too familiar with the company but technically there has been quite a drop from its top two or three years ago, and it doesn't look that great right now. It is below its various moving averages and there is quite a lot of active trading. The recent big reversal after the rally is a bad sign. Don't buy right now - wait until $3.50. Look at the bottom line and top line sales.

Another strong quarter with meaningful new wins. He models 43% revenue growth, 63% EPS growth. 13x 2024 earnings. Less appetite for stocks when bond yields are high, people are afraid. Makes sense at these levels.

Growing both organically and by acquisition, now just shy of $1B in revenue. Stock's pulled back, still a fairly attractive valuation. Expects a takeover down the road.

We would look at growth rate and forward price/earnings ratios here. Right now WELL is 21X. if we shift earnings to F2024 rather than F2023 it drops to 15X. Considering its history and management and potential, we could see this rising to 20X again, giving 30%+ upside potential if earnings come in as expected. Thus, we would be comfortable buying at the $4 to $4.20. 
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The stock has performed well this year - it was as high as +~110% year-to-date, and we see some consolidation here as being healthy. We do not see any specific news that would cause the share price to drop. At a 14.2X forward P/E and expectations for strong growth going forward, we would consider it buyable, however, we would like to see the price find support before entering here. 
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Shares recently dropped over disappointing margins and profits, but they are the best in telehealth. Also, they made puzzling acquisitions. But the CEO has a great track record and blue-chop investors are involved. The stock isn't going anywhere, but the market wants to see better profits.

WELL is up 84% YTD and not that far from its 52-week high. It ran up hard this year and the drop does look like profit-taking to us since there really was no negative news. We would consider it buyable today. For the Canadian sector we see it as quite attractive.
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It has had a very strong start to 2023 and has had minimal impacts from inflation and supply chain issues. It has 95% recurring revenue and organic growth of 21% year over year. Trades at 13.3 X EBITDA.

2024  Expectations :

Q4 EPS 3.7c; revenue $146.1M. 

2022 EPS 12c; revenue $538.5M

2023 EPS 21c; revenue $621M

We would consider it a buy today. 
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Fantastic CEO that has history of success
Aggregator of healthcare companies.
Valuation and profitability not in a great space.
Wants to see consistent profitability.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Strategy of acquiring clinics and digital assets. Strong player in digital health space in Canada. Entry into lucrative US market. Expensive valuation; high share price risk. Unlock Premium - Try 5i Free