WELL Health named “Top Pick” at Ventum Capital

The stock has been on fire of late, but Ventum Capital Markets analyst Rob Goff says there is more to come from WELL Health Technologies (WELL Health Stock Quote, Chart, News, Analysts, Financials TSX:WELL)>

In a research update to clients July 16, Goff named WELL as one of four technology stocks he regards as “Top Picks” for the second half of 2024. He simultaneously maintained his “Buy” rating and price target of $8.00 on the stock.

“We view WELL as a top performer in healthcare technology in Canada. WELL’s M&A playbook targets low-to-no-margin clinics, integrating digital efficiencies to boost revenues and cut costs, aiming for 15-20% margins,” he wrote. “WELL’s clinic network empowers its ability to develop and deploy its digital and AI service portfolio. WELL’s disciplined approach to acquisition, integration, development, monetization, and reinvestment has driven significant growth and reinforced investor confidence. Over the next 3 to 12 months, we expect WELL to build on its track record of portfolio optimization while delivering shareholder value through double-digit organic growth, in alignment with WELL’s Rule of 30 (combined organic revenue and EBITDA growth of 30%).”

The analyst thinks WELL will post EBITDA of $103.3-million on revenue of $975.2-million in fiscal 2024. He expects those numbers will improve to EBITDA of $126.1-million on revenue of $1.12-billion in fiscal 2025.

Goff says even with the recent runup, WELL stock is undervalued.

“WELL trades at 14.9x/12.2x 2024/2025 EV/EBITDA, with 25.7% 2024 revenue growth and 13.2% EBITDA margins,” he concluded. “In comparison, US peers trade at 18.4x/16.3x with 16% growth and 11% margins. WELL’s shares reflect 1.4x/12.2x our 2025 revenue/EBITDA forecasts. Our US peers have a median EV of ~US$1.8B, WELL’s EV is C$1.5B, indicating comparable scale. We highlight that WELL’s direct shares in HEALWELL AI (AIDX-TSX, NR) together with shares owned upon option conversion represent ~C$220M. Applying the mark-to market value of WELL’s option to purchase HEALWELL would reduce its 2024/25 EV/EBITDA multiples by roughly 1.3x/1.1x.”

Disclosure: WELL Health is an annual sponsor of Cantech Letter and Nick Waddell owns the stock.