Fin Pros Say Teladoc Might Be a Value Stock

Teledoc (TDOC) was a darling stock for Covid investors.

Folks locked in their home swarmed to the online healthcare connector, sending revenues and share price skyrocketing.

While the stock originally IPOd in 2015 around $30, it was 2020 that sent shares from $75 to over $300…and then they crashed.

Since mid-2022, shares of TDOC traded around $20.

Yet, the company’s performed a miraculous turnaround behind the scenes. 

Not only have revenues grown but operating cash flow has as well.

And with the stock currently trading at roughly 18.8x cash, it might be time to give this forgotten tech company a second look.

Teledoc’s Business

If you saw your doctor through an online portal during the pandemic, chances are you used Teledoc.

The healthcare technology company provides a comprehensive range of services from primary care to specialty care, chronic condition management, and prevention and wellness anytime, anywhere, using its proprietary technology platform and network of more than 50,000 clinicians across 175 countries.

It’s a fantastic idea that’s easy and affordable. Plus, it became widely adopted and accepted during the pandemic.

The problem is their technology isn’t hard to copy. They’re essentially a Zoom call for doctors.

This is evident in the company’s revenue growth as sales dramatically slowed in 2022 as shown below.

Financials

Source: Stock Analysis

What was once nearly 100% annual growth is now forecasted to barely eclipse 10% a year.

However, margins have improved to the point where TDOC generated free cash flow for the last couple of years.

That isn’t to say the company is profitable. Yet, a lot of the P&L costs putting them in the negative are depreciation and amortization, stock compensation, and writedowns – all non-cash expenses.

With only $627 million of net debt, TDOC has a pretty clean business overall.

Valuation

Source: Stock Analysis

Because of the non-cash expenses, TDOC doesn’t generate a P&L profit.

However, when compared to its peers on a price-to-sales and price-to-cash flow basis, it’s certainly cheaper. But is that because of its growth prospects?

Growth

Source: Seeking Alpha

We can’t say that’s the case here.

It’s nearest competitor, Veeva Systems (VEEV) didn’t exhibit better revenue growth last year and is barely ahead for next year.

Other competitors are in the same boat with iCad (ICAD) even worse off than the rest.

Profitability

Source: Seeking Alpha

Only VEEV generates profits, but it and Healthequity (HQY) have better free-cash-flow margins.

Our Opinion 8/10

Teledoc is actually a decent risk reward here. 

The decline in growth isn’t a done deal. And margins continue to improve.

Plus, the stock has a lot of short interest built into it, which could create a squeeze on price.

So, if you’re looking for a high risk/high reward payoff, Teledoc is a good bet.