Its stock has been a roller-coaster this week, but Haywood analyst Gianluca Tucci says WELL Health (WELL Health Stock Quote, Chart, News, Analysts, Financials TSX:WELL) is still very undervalued.
In a corporate update January 25, WELL said its upcoming quarter would be a record on the top and the bottom line.
“Based on our preliminary financial results and subject to finalizing our audit, I am extremely pleased to report that Well expects to announce record revenues and Adjusted EBITDA including positive adjusted and unadjusted EPS for Q4 2023,” CEO Hamed Shahbazi said. “As discussed in our business update last week, Well’s value proposition is resonating with the medical community across the country as the clear leader in helping clinic owners, administrators and care providers improve clinic operations. This is not only attracting an unprecedented number of new clinics and healthcare providers to Well, but it is also giving us an opportunity to grow in an extremely capital efficient manner. Most of the clinics we add to our platform are profitable on day one and are handpicked because of the opportunity for margin and profit expansion. All of this is made possible due to our talented staff, extensive operating experience, and trusted technology platform now features powerful and responsible use of Artificial Intelligence.”
Tucci laid out what he is looking for from the quarter.
“We are looking for Q4/23 Rev and Adj. EBITDA of $216.0M and $30.2M, respectively, against consensus expectations of $218.1M and $30.3M, respectively,” he said. “We do expect gross margin to compress against comparable periods largely due to its CarePlus acquisition which brings much tighter margins – we are modeling a consolidated gross margin of 46.0% in Q4/23 which compares to 46.1% q/q and 51.3% y/y.”
In a research update to clients January 25, Tucci maintained his “Buy” rating and one-year price target of $8.50 on WELL.
The analyst thinks WELL will post Adjusted EBITDA of $112.9-million on revenue of $760.8-million in fiscal 2023. He expects those numbers will improve to Adjusted EBITDA of $132.2-million on a topline of$901.5-million in fiscal 2024.
“Our $8.50 DCF-based price target implies a 2.7x EV/Revenue and 18.3x EV/EBITDA multiple on our 2024 estimates,” Tucci concluded. “WELL is currently trading at 1.4x/9.5x, EV/Revenue and EV/EBITDA multiple, respectively, on our 2024 estimates, versus its healthcare services peer average of 1.3x/8.9x and healthcare technology peer average of 3.1x/13.0x, respectively.”
Disclaimer: Nick Waddell is a shareholder of WELL Health and the company is an annual sponsor of Cantech Letter.
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