Dentalcorp sale suggests WELL Health is undervalued, Stifel says

Stifel analyst Justin Keywood maintained his “Buy” rating and C$9.00 target price for WELL Health Technologies (WELL Health Stock Quote, Chart, News, Analysts, Financials TSX:WELL) in a Sept. 29th note, arguing that recent Canadian healthcare take-outs highlight a disconnect between public market valuations and fair value for assets with strong secular tailwinds.

He pointed to Chicago-based private equity firm GTCR’s C$2.2-billion acquisition of Dentalcorp at 13 times last-twelve-month EBITDA, following UPS’s C$2.2-billion purchase of Andlauer Healthcare in April at 14 times, as evidence of early consolidation momentum in the sector.

“We see the early consolidation trend of Canadian healthcare assets as reflecting a disconnect in public-market valuation that persists, despite broader market strength, vs. fair value for good assets with secular tailwinds, including demographic trends and government funding support,” he said.

Keywood suggested investors revisit WELL, which he described as having the number-one market share for primary and specialty care clinics in Canada but only 1% consolidated overall, with a long growth runway.

“WELL acquires clinics at 0–5% EBITDA to then transform, with heavy technology implementation, to 10%–18%,” he said. “WELL’s Canadian network generates over $40-million of EBITDA on more than $500-million of value, although overshadowed by broader business streamlining initiatives currently underway but also highlighting opportunity as the initiatives play out and clinic M&A occurs.”

He also highlighted several growth drivers, including scale expansion, technology acquisitions, development of new tools leveraging WELL’s large patient visit base, and organic expansion through new doctors and U.S. exposure. WELL’s transformation model, he noted, rapidly lifts margins by implementing EMR updates, online booking, automated reminders and AI tools such as Ambient Scribe, while also creating purchasing synergies.

Recent regulatory and funding support adds to the backdrop. A Board of Arbitration awarded Ontario doctors a 7.3% compensation increase through 2028, alongside new fees and incentives to expand patient coverage.

“The announcement supports organic growth tailwinds for WELL’s Canadian clinic network and number-one market share,” said Keywood, pointing to an estimated 2.5 million unattached patients in Ontario and an aging population that will strain capacity.

At the same time, WELL is divesting certain U.S. assets and considering a spin-out of its WELLSTAR SaaS platform, which Keywood said is not fully reflected in current valuation. He estimated WELLSTAR and the Canadian clinic network together represent nearly $800-million of value, compared with only about a quarter of projected 2025 sales.

“We believe as streamlining activities progress and Canadian M&A occurs, shares should re-rate higher,” he said.

WELL Health is a multichannel digital health technology company and Canada’s largest owner and operator of outpatient health clinics. It also provides electronic medical records services and digital health apps to doctors and clinics across Canada, while operating facilities in both Canada and the U.S.

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

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