While TSX stocks were shaken last week, many indicators point towards a continued rally. In an era of record highs, it’s important to find the companies that will continue to provide value in the long term. So, you need to identify innovative companies with a strong leadership team that are part of a rapidly expanding market. One such stock on the TSX is WELL Health Technologies (TSX:WELL).
This health-tech company has managed to crush the broader market returns ever since it went public in April 2016. However, as the first Canadian health company to offer compatibility with iPhone and recent expansion into global markets, WELL Health is just getting started. Furthermore, the stock is down over 25% since February making this a golden opportunity to buy the dip.
What makes WELL Health stock a top pick?
WELL Health stock is valued at a market cap of $1.32 billion. Its management team believes that the Canadian primary healthcare system is under-digitized and the lack of modernization has resulted in inefficiencies. While patients face long wait times, the physicians are overworked and burdened by operational challenges.
However, the Canadian government continues to spend heavily on healthcare. For example, in 2017, the federal spending on care delivery stood at $242 billion or 11% of the country’s GDP, making the industry ripe for disruption and creating massive opportunities for WELL Health.
The company is a primary healthcare operator and a tech innovator allowing it to combine professional healthcare expertise with technology and create an improved outcome for healthcare participants.
WELL Health is an active acquirer of digital assets and primary healthcare services. These acquisitions are highly accretive and the company is now the single largest chain of primary healthcare clinics in British Columbia.
Record quarterly results
In the first quarter of 2021, WELL reported revenue of $25.6 million, a year-over-year increase of 150%. This growth in top-line was primarily driven by a 345% increase in Software and Services sales. WELL reported a second consecutive quarter of adjusted EBITDA in Q1 and this figure stood at $1.1 million.
In the March quarter, WELL announced the acquisition of CRH Medical. This transaction was valued at US$372.9 million and was funded by a $302.5 million subscription receipts offering as well as a senior secured credit arrangement that was administered by JP Morgan and a syndicate of lenders. The credit facility was for an aggregate amount of US$300 million which will help WELL support the growth of its business via future acquisitions.
Further, CRH is forecast to generate sales of US$150 million with an EBITDA of US$60 million and a free cash flow of US$40 million in 2021. In 2020, WELL Health’s total sales stood at $50.24 million. It means, WELL’s combined pro forma revenue is fast approaching $300 million with more than $80 million in EBITDA on a run-rate basis.
What next for WELL Health stock?
Bay Street analysts tracking WELL Health stock expect the company to increase sales by 367.5% year over year to $235 million in 2021 and by 40.4% to $330 million in 2022. Its bottom line will also improve from a loss per share of $0.03 in 2020 to earnings of $0.08 in 2022.
As WELL Health continues to focus on acquisitions going forward, investors can expect these estimates to move higher as well. WELL Health stock is currently trading 27% below its record highs making it attractive to both growth and contrarian investors. Analysts have a 12-month average target price of $11.35 which is 67% above its current trading price.
WELL Heath stock is valued at a forward price to 2022 sales multiple of less than 4x which is very reasonable given its robust forecasts and acquisition-based business model.