Teladoc vs. Well Health: Which Telehealth Stock is a Better Buy?

NYSE: TDOC | Teladoc Health, Inc.  News, Ratings, and Charts

TDOC – The COVID-19 pandemic accelerated the demand for telehealth services in the last year. This shift makes companies such as Teladoc (TDOC) and Well Health (WLYYF) solid bets for 2021 and beyond. While both the stocks are growing top-line at a stellar pace, only one is undervalued and trading at attractive multiples.

During the pandemic, healthcare stocks were pushed into the spotlight as the need for innovative medical solutions rose exponentially. Patients have now come to expect the efficient and stress-free world of digital healthcare which is forecast to expand even after the pandemic. 

The telehealth market, which is defined as the delivery and facilitation of health and health-related services, is growing rapidly. The U.S. telehealth market by revenue is predicted to grow at a CAGR of over 26% through 2026.

With this in mind, now could be a good time to invest in Teladoc (TDOC) and WELL Health (WLYYF). Let’s see which of the two companies should be part of your portfolio.

Teladoc Health

As COVID-19 kept people confined to their homes, Teladoc’s digital platform handled 10.6 million visits in 2020, significantly higher than 4.14 million visits in 2019. While the company’s revenue growth accelerated in 2020, investors should also note that its top-line grew at an annual rate of 75% between 2013 and 2019.

In the first quarter of 2021, Teladoc Health saw its revenue grow by 151% year over year while total visits increased by 56% as well. Its management forecasts sales to increase 85% year over year in 2021 and estimates adjusted EBITDA between $255 million and $275 million. Comparatively, Teladoc reported an adjusted EBITDA of $127 million in 2020.

Teladoc stock is valued at a market cap of $22.65 billion and has gained 200% in the last three years. However, despite its market-thumping returns, TDOC stock is currently trading 50% below its record high.

Analysts expect sales to rise by 83% to $2 billion in 2021 and by 29% to $2.6 billion in 2022. This suggests TDOC stock is valued at a forward price to sales multiple of 11.4x which is steep given its negative profit margins.

Well Health Technologies

Well Health Technologies is a Canadian telehealth company that has quickly established itself as an international leader. Well Health just announced the acquisition of specialty telehealth and diagnostic powerhouse MyHealth, its 10th acquisition this year, officially making the company the largest owner-operator of outpatient medical clinics in Canada. 

The MyHealth acquisition is expected to generate an annual revenue run rate of approximately CA$100 million ($82.69 million) with EBITDA margins exceeding 20%. Upon closing, Well Health’s combined pro forma revenue will be approaching CA$400 million ($330.77 million) and CA$100 million ($82.69 million) in EBITDA  on a run-rate basis. This growth is unprecedented, especially in the healthcare industry where there are often high barriers to entry.

Fortunately for investors, Well Health stock is trading below the recent financing price. This means that investors can snag Well Health at a massive discount compared to its U.S. competitors. However, this won’t be the case for long as the company recently confirmed that it is beginning preparations for an upcoming NASDAQ IPO and has hired the renowned law firm Fenwick & West to assist with preparations. Fenwick has represented blue-chip clients such as Amazon (AMZN), Alphabet (GOOG)(GOOGL), Cisco (CSCO), and most recently, Coinbase (COIN) meaning that Well Health is in excellent company.

Analysts expect Well Health to increase sales by a stunning 367.5% year over year to CA$235 million ($194.3 million) in 2021 and by 40% to CA$329 million ($272 million) in 2022. These astonishing growth rates will help WELL Health improve its bottom line from a loss of $0.03 per share in 2020 to earnings per share of $0.08 in 2022. It also means Well Health stock is valued at a price to sales multiple of 5.9x, given the company’s market cap of $1.38 billion ($1.14 billion). 

The verdict

According to a report from Grand View Research, the telehealth market touched $56 billion in global sales last year and is predicted to be worth $298.9 billion by 2028. Given this projection, Teladoc and Well Health have enough room to grow top line and earnings for the foreseeable future.

However, while both the companies remain enticing bets for investors, Well Health’s considerably low valuation, positive profit margins, and extremely disciplined growth strategy make it a better stock to buy right now.

TDOC shares were trading at $151.95 per share on Monday afternoon, up $5.38 (+3.67%). Year-to-date, TDOC has declined -24.01%, versus a 13.29% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

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