WELL Health Technologies Corp

Canada-headquartered WELL Health Technologies Corp is an omni-channel digital health company. The Company is primarily engaged in the operation of primary healthcare facilities, as well as an electronic medical records (EMR) business. Its shares have recorded a long run-up on the stock exchange i.e. up more than 305% in a year-on-year basis, ~150% in the last three months and ~ 47% in a month over period. The stock has significantly outperformed the benchmark index in the period mentioned above.

Key Points to focus:

• Technical indicators reflect that the stock is in the overbought zone, which indicates that a potential price correction is on the cards.
• The stock is trading at a significantly stretched valuation. The stock is available at forward sales to multiple of the stock is trading at EV/Sales multiple of 20x against the industry (healthcare providers and services) median of 1.9x.

Q2 FY20 Result Highlights

• COVID-19 has caused an acceleration of WELL's telehealth business as patients observing physical distancing measures turned to telehealth. WELL's quarterly telehealth visits grew sequentially by 730% to more than 124,800 telehealth visits.
• WELL achieved record quarterly revenue of CAD 10. 6 million during the 3 months ended June 30, 2020 representing 43% YoY growth.
• The group recorded an Adjusted EBITDA loss of CAD 0.54 million during the period.
• Digital services revenue, consisting of predominately SaaS based revenue generated by the Company's WELL EMR Group, grew by 1212% to CAD 2.3 million in the second quarter.
• WELL's EMR footprint has now expanded to over 2,000 clinics and more than 10,000 physicians across the country.

Technical Indicators suggest that the stock is in Overbought zone

On the weekly and monthly price chart, the leading momentum indicator 14-day RSI is hovering in a steep overbought zone. On a weekly chart, 14-day RSI is featuring above 85 on a scale of 0-100, and on a monthly price chart, the 14-day RSI is hovering above 95, which indicates a potential price correction in the short-term. Also, Stochastic RSI, an indicator of an indicator, is used in technical analysis to provide a stochastic calculation to the RSI indicator. This is also hovering in an overbought territory both on the weekly and monthly price chart, which again indicates a potential price correction from the current trading level.

Overstretched Valuation

After a solid price performance over the past year, shares of WELL are commanding a gigantically higher valuation against its peer’s average. For instance, from the LTM Price to Sales multiple, WELL Shares are trading at a multiple of 21.18x, whereas industry average stood at 1.8x, which reflects a steep high valuation of WELL against its industry average. Further, from the LTM EV/Sales multiple standpoints, WELL shares are trading at a significantly higher valuation of 19.89x, whereas the industry average EV/Sales multiple of 1.85x. On NTM basis, the stock is trading at EV/Sales multiple of 20x against the industry (healthcare providers and services) median of 1.9x.

Stock Recommendation

The leading momentum indicator 14-day RSI is hovering in a steep overbought zone. Further Stochastic RSI is also hovering in an overbought territory both on the weekly and monthly price chart. These technical indicators suggest that there is a potential price correction is on the cards. On the valuation front, the stock is available at a forward EV/Sales multiple of 20x against the industry (healthcare providers and services) median of 1.9x, which suggests a stretched valuation. Hence, considering the aforementioned facts, we have given a “Sell” recommendation, at the closing price of CAD 6.32 (on September 11^th, 2020 after the market close).

Disclaimer

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