Keep your eyes on WELL Health, this portfolio manager says

The stock is down by a lot but investors should be paying attention to Canadian digital healthcare company WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL), says portfolio manager Bruce Campbell. Campbell thinks it’s only a matter of time before the market reconsiders this name which is executing on both its organic and inorganic growth fronts.

“This one falls into the category of Past Picks that we had and they continue to grow their business and they continue to execute. But right now the market is just really not interested in bidding up those types of companies,” said Campbell, president of StoneCastle Investment Management, who spoke on BNN Bloomberg on Monday.

WELL Health is an omni-channel digital health provider with a range of assets including medical health clinics, a gastroenterology and anesthesia business in the United States in CRH Medical and virtual healthcare operations both in Canada and the US. Last month, the company announced an agreement to acquire Calgary-based healthcare provider INLIV which specializes in consumer preventative health, corporate and executive health, primary care, cosmetics, fitness and integrated health services. INLIV had trailing 12 months revenue of $7.3 million ended on April 30, 2022, and the company has over 1,000 customers with over 85 per cent of revenues being recurring in nature.

The INLIV deal would be WELL’s first acquisition in Alberta.

“INLIV has an excellent track record in providing outstanding patient care,” said Dr. Michael Frankel, WELL’s Chief Medical Officer, in a press release. “We are very excited about adding them to our network as this planned acquisition represents the continued execution of our plans to further grow our presence in the premium corporate and executive health segment. We are intent on continuing to establish our technology enabled clinical group across the country.”

WELL was a big winner early on in the pandemic where its stock price went from the $1-$2 range up to $9.00 by February, 2021. That’s when the air started coming out of a lot of stocks, with the general rotation out of growth names, especially those in the tech sector, starting late last year. WELL closed on Monday at just over $3 per share.

“They recently did an acquisition and they’ve done a financial raise where they cashed up the company. And if you look at the CRH acquisition that they made it continues to execute really well,” Campbell said. “What they’ve been able to do is build this digital platform that is beyond just doing doctor’s visits remotely. It’s really all-encompassing for the doctors, how they track patients, their medical records, doing appointments and a number of other different things. Right now, that’s kind of fallen out of favour.”

“It was very in vogue, especially at the beginning of the pandemic and the stock price did really well and has since pulled back. They continue to increase their numbers,” he said.

WELL’s last reported quarter came in May when the company posted Q1 revenue of $126.5 million, representing a 395 per cent year-over-year increase, and adjusted EBITDA of $23.5 million, up from $0.5 million a year earlier. WELL said its organic revenue growth rate was 15 per cent on a year-over-year basis, while management increased its full 2022 guidance to revenue of $525 million (previously “over $500 million”). 

The company announced in June that its second quarter 2022 results should be particularly strong, with the company saying it had a 40 per cent year-over-year increase in total omni-channel patient visits during the month of May, highlighted by strong revenue growth from its MyHealth business in Ontario as well as its US businesses in women’s health-focused platform Wisp and virtual health company Circle Medical.

Campbell said with the company’s strong follow-through on its acquisition and expansion strategy, the stock should get rewarded in time.

“It’s not one that we own right now but we have our eye on it, really, every single day. At some point in time we’d like to go back because we think that the management team has done an excellent job of [doing] exactly what they’ve told us they were going to do [to] deliver on acquisitions and then organic growth,” Campbell said.

“And they continue to build that up while at the same time, the stock price gets cheaper,” he said. “So, it means that the company is getting cheaper from a valuation standpoint.”

“We’re certainly looking at it and we would like to go back into it at some point in time,” he said.

Last week, WELL gave an update on Wisp, which it calls the fastest, most accessible sexual and reproductive telehealth service in the US. The company said that in light of the recent US Supreme Court verdict overturning Roe v. Wade, Wisp will be donating one per cent of proceeds from its emergency contraceptive and birth control categories for the next two months along with matching employee donations, with proceeds going to Wisp’s long-standing partners, Sexuality Information and Education Council of the United States (SIECUS) and The New York Birth Control Access Project (NYBCAP).

Wisp said it saw a 3,000 per cent surge in its emergency contraceptive category within the 24 hours after the Supreme Court ruling.

“The decision fuelled consumer demand for emergency contraceptives from trusted and reliable sources,” said Dr. Laura Purdy, MD and Wisp Medical Director, in a June 29 press release. “We’re committed to continuing to offer patients safe, accessible and convenient options.” 

Disclosure: Jayson MacLean and Nick Waddell own shares of WELL Health Technologies and WELL Health is an annual sponsor of Cantech Letter.