WELL Health Technologies has more upside, says Echelon

Look for WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL) to continue its successful M&A program, according to Echelon Capital Markets analyst Rob Goff, who delivered an update to clients on Friday where he reiterated a “Speculative Buy” rating on the stock.

WELL Health, which owns and operates primary healthcare facilities in Canada and the US along with providing digital electronic medical records (EMR) software services and telehealth capabilities, provided on Thursday a preliminary account of its first quarter 2023 patient visits and interactions, with the intention of announcing another record performance for total patient interactions at about 1.4 million and combined paint visits of 975,500. The numbers would imply a year-over-year growth rate of 27 per cent on patient interactions and 25 per cent growth on patient visits.

“Organic growth continues to be a significant contributor to our overall growth, with Q1 being the fifth consecutive quarter of double-digit organic growth,” said Founder and CEO Hamed Shahbazi in a press release. “We are now on a run-rate of 5.6 million synchronous and asynchronous patient interactions which reflects truly impressive scale and reach.”

WELL’s share price is up a huge 102 per cent year-to-date which is a reflection of the company’s “consistent, fundamental outperformance, share liquidity, financial flexibility and clear discipline,” Goff said.

The analyst said WELL’s US digital health peers are currently up about nine per cent for the year, while Canadian peers are up on average just one per cent. 

“WELL has consistently outperformed against expectations with its double-digit organic growth across the past five quarters enabling the Company to exceed its rule-of-thirty for organic growth plus EBITDA margins,” Goff wrote.

The analyst said WELL has consistently exercised discipline and prioritized tuck-in acquisitions, aside from CRH Medical, which was acquired in April 2021 for US$373 million. Now, the company’s relative outperformance in 2023 so far leaves it with the opportunity “to consider the potential value and strategic accretion of acquisitions across its much smaller Canadian peers given their arguably attractive valuations,” according to Goff.

Ahead of WELL’s first quarter results, expected on May 12, Goff is expecting Q1 revenue of $160.2 million and adjusted EBITDA of $25.4 million. For the full 2023 year, Goff is calling for revenue of $672.5 million and adjusted EBITDA at $115.5 million.

With his reiterated “Speculative Buy,” Goff also maintained a one-year return of $8.00, which at press time represented a projected return of 39.1 million.

“Looking ahead, we remain bullish on WELL’s operating momentum and shareholder value proposition despite its share price doubling this year,” Goff wrote. “We believe WELL investors would reward accretive acquisitions where the current valuation gap leaves the potential for significant value and strategic gains.”

“We expect WELL to continue being active with tuck-in acquisitions in primary care along with any technology assets that can help facilitate the Company’s expanding ecosystem of support for clinicians,” he said.

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