WELL Health is a Buy, says PI Financial

Organic and inorganic growth are just what the doctor ordered for WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL). That’s according to PI Financial analyst Jason Zandberg, who provided an update on the company on Monday, saying investors should be looking for WELL to outperform expectations in its upcoming quarterly report.

Ahead of first quarter 2023 financials due from digital healthcare company WELL Health on Friday, Zandberg commented on the stock’s success so far in 2023, where WELL is currently up about 100 per cent year-to-date.

Zandberg said there are a number factors at play.

“WELL’s expected strong performance in 2023 is driven by several catalysts including a growing number of public/private partnerships within healthcare, increased federal government funding of healthcare within Canada, and the use of AI-powered tools,” Zandberg wrote.

Last week, WELL provided a preview of its Q1 patient visit and interaction numbers, which included 1,397,353 patient interactions for a year-over-year increase of 27 per cent and 503,735 patient visits, also up 14 per cent from a year earlier.

WELL said its US Patient Services business saw a 40 per cent increase, with organic growth in its Circle Medical and Wisp businesses along with acquisitions by WELL-owned CRH Medical factoring into the uptick.

As for the Q1 top and bottom, Zandberg said he’s anticipating $158.9 million in revenue and $23.9 million in adjusted EBITDA for the first quarter. The analyst said both WELL’s topline and earnings were a beat of his estimates in the previous quarter and he anticipates the company will keep on this path.

“We see WELL as primed to benefit from balance sheet strength and organic growth enabling potential M&A in 2023,” Zandberg wrote.

“With strong organic growth (notably in Q4/22) and a robust cash flow profile, management indicated that there are potential M&A opportunities on the horizon. WELL is expected to have strong performance across all business units and for the Company as a whole in 2023,” he said.

With the update, Zandberg maintained a “Buy” rating on the stock and $7.50 target price, which represents an EV/Sales multiple of 1.8x and 1.6x based on his 2023 and 2024 estimates, respectively. At the time of publication, Zandberg’s $7.50 target represented a projected one-year return of 30 per cent.

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