2 TeleHealth Stocks to Buy, 1 to Watch in 2022 | The Motley Fool

Telemedicine (medical care delivered by phone or internet video) skyrocketed in 2020. That growth trend slowed in 2021 as many people returned to their doctors’ offices. But the telemedicine trend is not over. the big tech companies sure don’t think so. amazon (amzn -0.26%) care launched nationwide in early 2022, and oracle (orcl -0.05%) and microsoft (msft 0.53%) made big acquisitions in the space, the first taking over healthcare software company cerner (cern) and the second taking over artificial intelligence software company conversational undertone.

i think telemedicine will continue to be a huge growth trend through the 2020s. despite suffering a massive drop in stock price, telehealth leader teladoc health (tdoc 1.51 %) is still a buy in my book. so is doximity (docs -2.69%), and the recent spac ipo docgo (dcgo 0.20%) is worth a look. here’s why.

Reading: Top telehealth stocks

1. the leader in telemedicine is still in high growth mode

The leader in the space, teladoc health, suffered a tremendous setback in its share price. he is down nearly 80% from all-time highs at the time of this writing. An early pandemic favorite, its growth has slowed in the past year and many investors are upset with teladoc’s meager profit margins. teladoc’s market capitalization of $11.7 billion is far less than the $18.5 billion in cash and stock paid to acquire connected care technologist livongo health in late 2020.

Things have been grim for teladoc stock lately, but it’s worth noting that this company went public in 2015 and has a history of consistent revenue growth. Management believes its virtual care platform for primary care, mental health, chronic condition management and a range of specialty care offerings will continue to expand. sees revenue growth at an average rate of 25% to 30% through 2024, excluding new acquisitions.

If teladoc can pull it off, that would equate to about $4 billion in annual revenue by 2024. The company is also starting to achieve profitable scale. Free cash flow (FCF) was $130 million last year. That’s a small profit margin, given that teladoc made just over $2 billion in revenue in 2021, but if it can continue to grow in the years to come, I expect this metric to improve.

See also: Stock Market Under Biden | U.S. Bank

Teladoc is currently trading at 88 times the FCF of the last 12 months and 4.5 times the expected value of sales to companies for 2022. The leader in telehealth will have to prove that its growth projections are real, especially after The slowdown in virtual care reported in 2021. Greater tech competition is also a concern. but I think digitally connected care will continue to improve and expand its share of the overall healthcare market.

teladoc is emerging as one of the main beneficiaries as a result. It’s going to be a bumpy ride, but now seems like a good time to start nibbling on this stock again.

2. connected care from a social angle

doximity, the social network for healthcare professionals, went public about a year ago, raising more than $600 million; not that doximity was in dire need of cash. The small business reported generating nearly $79 million in FCF during the first nine months of its 2022 fiscal year, an FCF profit margin of 32%. That’s not bad for the first year of a new company like a publicly traded company.

but what does doximity have to do with telehealth? this is much more than a social platform for medical professionals to stay in touch. it also has built-in call and video capabilities for doctor-to-doctor and doctor-to-patient consultations. has hipaa compliant tools for sharing medical records. and doximity just deployed a small amount of its cash (it had $766 million in cash and short-term investments as of December 31, 2021) to acquire amion, a small doctor scheduling software outfit.

doximity is working from a position of strength and is reporting increasing adoption of digital tools among care providers and patients alike. According to a recent doximity study, three-quarters of patients surveyed said they would continue to use telemedicine even after the pandemic.

See also: 10 Stocks to Buy in Your 20s Every Millennial Should Own | InvestorPlace

Excluding the amion acquisition, doximity believes that it will continue to grow at a rapid rate over the next year. for fiscal year 2023 (the 12 months ending March 31, 2023), it expects to grow annual sales to about $450 million, a 33% increase over its guidance for the current year. Highly profitable and boasting stellar growth numbers, doximity looks like a great long-term buy at the moment. It trades for 85 times the 12 month FCF, but I think it’s a premium worth paying, assuming you have at least a few years to allow this emerging growth story to play out.

3. a new entrant in telehealth and last-mile mobile care

docgo is a new entrant to the world of telehealth stocks, having just gone public through spac at the end of 2021. the company acts as a last-mile provider of mobile health and transportation services ( outpatient services), as well as a technology-enhanced service to send a care provider to where it is most convenient (at the patient’s home or workplace).

Operating the technology and employing a dedicated staff of medical professionals is not cheap. that appears in the financial numbers. In 2021, Docgo reported operating income of just $15.3 million on total revenue of $319 million. fcf for the full year period was negative $6.76 million. Docgo himself admits that he relies heavily on relationships with healthcare providers. For example, the renal dialysis care center chain fresenius (fms -1.22%) accounted for just over 7% of docgo’s revenue in the past year. that trust could be a liability if strategic partners suddenly decide to go in a new direction.

however, docgo has my attention, at least. total revenue increased 239% last year. and although profitability is slim, this is still a small operation. If Docgo is scalable and profit margins increase as it expands, that revenue growth could be worth a lot to shareholders in the future. Following its IPO from SPAC, it ended 2021 with nearly $176 million in cash and just $1.9 million in debt.

Of course, docgo will need to prove that it is much more than a technology-enhanced ambulance and mobile care provider. if not more than that, it could be tough for the company as it struggles to gain market share from established mobile and outpatient medical services. but the company touts that its platform can electronically dispatch the right provider with the right equipment at the right time, as well as provide mobile medical records and information to the professional managing care.

Put another way, docgo could be a bridge between telehealth and in-person medical visits. Management believes it will grow at a rate of about 30% in 2022. This stock is still in the “try it” box, but it’s on my watch list.

See also: The 25 Best Stocks of 2020 – TheStreet

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button