WELL Health is heading higher, says Stifel

The stock is up over 90 per cent so far this year, but there are plenty of reasons why investors should expect more from WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL). That’s according to Stifel GMP analyst Justin Keywood, who in a Thursday report reiterated a “Buy” rating and $13.50 target price on WELL.

Stifel recently met with WELL Health Chairman and CEO Hamed Shahbazi, with Keywood coming away with a number of key points on why WELL’s growth potential is strong.

Vancouver-based WELL Health has the largest physician network in Canada with about 85 clinics and over 2,500 physicians, with a plan to grow its stable by adding another 20-30 clinics in 2023. Keywood said management is targeting over 400 clinics at maturity, and the analyst said WELL’s tech-based approach adds significant value to the healthcare system.

“WELL enables doctors to see more patients, along with leading to greater billings by removing administrative burdens for doctors, along with implementing more technology, leading to efficiencies,” Keywood wrote.

Having now made about 50 acquisitions since inception, WELL’s business continues to evolve, according to Keywood, who pointed to its success in the United States with assets Circle Medical and WISP, which have grown revenues by 1,000 per cent and 60 per cent, respectively, since acquisition. 

Keywood also spoke of the impending rise of artificial intelligence as a force within almost every facet of business, including delivery of healthcare services, where WELL Health is currently exploring how AI could impact healthcare. 

“Developments could be rapid, and WELL has the foundation, including a ~20 per cent [electronic medical records] market share, to be a leader in the space,” he said.

Finally, Keywood pointed to the Ontario government’s recent announcement to support private clinics in the delivery of some services, with the analyst saying that WELL could play a “meaningful role” in the shift.

By the numbers, Keywood thinks WELL will move from revenue of $569.1 million in 2022 to $677.3 million in 2023 and from EBITDA of $104.6 million in 2022 to $116.0 million in 2023.

Keywood said the health tech sector has been volatile, with frothy valuation in the early days of COVID and since settling back substantially. At the same time, the analyst noted some recent M&A moves in the sector by large companies, concluding that they illustrate the value of healthcare assets, where take-out multiples range from 3x to 9x EV/Sales.

“WELL’s valuation has re-rated from 1.3x EV/Forward Sales early this year to ~2.3x, where mostly unprofitable peers trade at 2.5x. However, we see a path for continued outperfomance and a higher multiple,” Keywood wrote.

At the time of publication, Keywood’s $13.50 target represented a projected one-year return of 150 per cent.

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