WELLSTAR could be a shining star for WELL Health, Stifel says

Stifel Research analyst Justin Keywood maintained a “Buy” rating on WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:WELL) in a July 15 note after its forthcoming subsidiary, WELLSTAR, was updated in a note highlighting new growth targets tied to three signed letters of intent. The proposed acquisitions represent $15-million in annual recurring revenue and $5-million in adjusted EBITDA, an expected 20–25% boost to WELLSTAR’s current run rate.

“We view the news as progress towards WELL’s plan to spinout/IPO WELLSTAR that could unlock value (last financing at C$285mm),” Keywood said. “Peer health-tech valuation remains favourable, including CDN comp, VitalHub (VHI-TSX, NR) at 6.3x/26.1x 2025 EV/Sales/EBITDA, supportive of WELLSTAR valuation and could suggest ideal timing for a spinout/IPO.

“More broadly, we consider U.S. divestitures (WISP/Circle Medical) as the key catalysts to unlock major value with large de-leveraging potential (up to 0.8x turn), where proceeds could fuel additional M&A within Canada and lead to a more pure-play stock and better valuation.”

WELL Health is a Canadian health-tech company that runs clinics and provides technology to other healthcare providers. It owns about 200 clinics offering both in-person and virtual care. It also supplies electronic medical records software and holds around 20% of the EMR market in Canada. The company has strong cybersecurity tools and is expanding into the U.S. telehealth market. It’s actively looking to grow, with about 100 possible acquisitions under review and around 10 already at the letter-of-intent stage.

Keywood said his investment thesis for WELL Health is based on four main points: expanding its clinic network, acquiring tech assets that boost SaaS revenue and improve its platform, using patient visit data to develop and test new technologies, and growing organically by rolling out these tools across Canada and the U.S. He added that WELL could also grow clinic revenue by bringing in more doctors, especially with virtual care now expanding capacity.

WELL Health has built an ecosystem of over 80 healthcare businesses across Canada and the U.S., primarily through acquisitions. It now holds the top market share in Canada, with more than 210 clinics, though that still represents just 1% of a $30-billion market. In contrast, 55% of the U.S. primary care market has already been consolidated, aligning with WELL’s goal to grow its Canadian footprint tenfold. The company’s model aims to ease system strain by cutting administrative work and introducing new tech, allowing doctors to see more patients. Typically, doctors keep 70% of billings, with 30% going to WELL.

“As WELL acquires, we see scale benefits and margin improvement, including as earlier clinic assets progress to margin maturity,” Keywood said. “We also see WELL’s consolidation model as supporting long-term strategic value as a healthcare infrastructure play with take-out potential.

He noted that from the early 2010s to 2020, the U.S. primary care market saw significant consolidation, growing from about 29% to roughly 55%.

“Insurers, hospital groups and private equity have been the primary consolidators with the pursuit of bargaining leverage and higher prices, as well as achieving synergistic patient volume flows, which also contribute to greater pricing,” he said. “The largest employer of U.S. physicians remains UnitedHealthGroup.”

Disclosure: Cantech Letter’s Nick Waddell owns shares of WELL Health and the company is a sponsor of the site.

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