Teladoc shares are selling at a historic low in proportion to sales.
During the early phases of the pandemic, Teladoc Health’s (TDOC -1.27%) stock rose sharply, with good cause. Consumers remained home more and chose telemedicine appointments over in-office ones. Teladoc’s business grew tremendously, with revenue and visitation increasing by triple digits.
Since then, Teladoc has sustained tremendous levels of growth. Each quarter, there has been a double-digit increase in revenue and visitors. Nonetheless, the company’s lack of profitability and significant goodwill impairment losses from the previous year have diminished investors’ interest in the shares.
Should You Invest in Teladoc Stock Now? Let’s investigate.
Billion-dollar costs for impairment
Let’s start by looking at Teladoc’s issues. Investors were let down by the corporation when it revealed three-quarters worth of billion-dollar non-cash goodwill impairment charges in 2017. Teladoc reported $13.4 billion in costs related to its 2020 purchase of Livongo, an expert in virtual chronic care.
As a result, Teladoc saw a net loss of $13.6 billion for the year instead of a loss of roughly $428 million the year before. This is unquestionably a setback on the road to profitability.
Yet, there is another angle from which we can see this. Last year was a challenging one due to these charges and overall economic hardship. The worst may, however, be gone.
Teladoc began refocusing its strategy earlier this year in order to prioritize revenue growth and profitability. The company is focusing on being more efficient and trying to cut costs as part of this. The objective is to align the cost structure with the current rate of business growth. The first move was to eliminate 300 positions and various office locations.
The need for Teladoc’s services is still present. In the fourth quarter, the company’s sales increased by 15%, and web traffic increased by 8%. Both Teladoc’s integrated care business and its BetterHelp mental health service saw a year-over-year increase. The business offers integrated care plans to companies that include everything from primary care to specialist visits, as well as BetterHelp services that are sold directly to customers.
Increase in chronic care
Teladoc also has boosted U.S. integrated care subscribers and BetterHelp paying users. The quarter saw a 16% increase in enrolment for chronic care programs. Although Teladoc’s acquisition of Livongo has decreased earnings thus far, it is a smart move to bolster the chronic care industry.
According to Teladoc, a range of chronic care services can be related to member retention. For instance, the organization discovered retention was 10% greater after a year for individuals enrolled in the diabetes program and at least one additional program vs. those enrolled in diabetes just.
The company projects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 12% to 32% in 2023 and revenue growth in the range of 6% to 11%. Last year, revenue increased while adjusted EBITDA decreased.
It’s also vital to keep in mind that Teladoc still remains early in its growth journey. Yeah, the business provides services to more than half of Fortune 500 firms. Despite still, just 80 million Americans have access to the site at the moment. Out of the 298 million insured lives in the US, that is.
Meanwhile, this decade is expected to see double-digit growth in the telemedicine business. All of this indicates that Teladoc, who is already a leader, has room to grow in that position.
Let’s now discuss valuation. Shares of Teladoc trade at 1.7 times sales. By that standard, that is probably their lowest level ever. Also, it appears to be a fantastic deal, given the company’s prospects.
So, it is still possible to purchase Teladoc. The business might be entering a completely new stage of growth. Despite this, it’s possible that Teladoc shares won’t really soar until the business demonstrates tangible advancements toward profitability. Risk continues.
Yet, Teladoc can be the ideal investment for you if you have some risk tolerance and are seeking a high-growth prospect.