There are plenty of exciting healthcare companies trying to innovate how patients receive medical care. In the world of virtual healthcare, one of the best-known companies is Teladoc Health (NYSE:TDOC), a telehealth provider with a $6 billion market cap. Shares of Teladoc have done exceptionally well in 2019, having risen by more than 70% and showing little sign of slowing down.

As such, it's not surprising to see Wall Street is quite optimistic about Teladoc's prospects, with 17 of 21 analysts covering the company giving the stock a buy rating. Let's take a closer look to see whether investors should consider adding Teladoc to their portfolios or hold off for another time.

A healthcare worker holding a tablet. Abstract images related to healthcare and technology are overlaid on top.

Image source: Getty Images.

The virtual-healthcare market

The idea of virtual-healthcare consultations as an alternative to traditional medical checkups seems pretty compelling on paper. Instead of having to drop by a doctor's office to ask about a medical problem, patients can simply use the Teladoc platform to connect with a medical professional online. Similar to how ridesharing platform Uber changed the taxi industry, telehealth companies promise a paradigm shift in how patients receive healthcare.

The math behind this industry is compelling as well. The global telehealth market was valued at $49.8 billion in 2018 and is expected to reach $266.8 billion by 2026 -- a 23.4% compound annual growth rate. Few areas in biotech are expected to see such an impressive growth rate over the next several years. In comparison, diabetes and breast cancer treatments, both highly lucrative markets, have estimated compound annual growth rates of 5.7% and 10.7%, respectively, with each of these markets being just a fraction of the overall size of the projected virtual healthcare market.

Recent financial performance

Teladoc reported its third-quarter earnings results at the end of October, handily beating Wall Street estimates. Although the company reported a net loss of $20.3 million, or a loss per share of $0.28, this was quite a bit better than the $0.39-per-share loss analysts expected.

Revenue increased by 24% compared to Q3 2018. At the same time, total patient visits increased by an impressive 45%, reaching 928,000, while the number of paid members in the U.S. grew by 55% year over year. These are important metrics for the company since Teladoc operates primarily via a subscription-based business model.

Teladoc CEO Jason Gorevic said:

As we close out the year, we are confident in our positive momentum and are raising revenue and visit guidance for the full year. Our results serve as yet another affirmation of the expanding role of virtual care globally, and our proven ability to execute at scale.

The UnitedHealth partnership

These figures are impressive enough by themselves, but the fact that major insurers are coming on board with Teladoc is another optimistic sign for investors. Its recent partnership with the country's largest health insurance provider, UnitedHealth Group, gives Teladoc exposure to an additional 15 million patients under UnitedHealth's commercial insurance plans.

It was a major achievement for Teladoc as this increased exposure should prove to be a major revenue driver. The deal could also open the door to partnerships with other insurance providers in the future.

What about the competition?

While Teladoc's growth figures have been impressive, the biggest concern for the company down the road is future competition. Considering the sheer size of the telehealth industry, there will likely be many competitors emerge to try and wrest market share away from Teladoc, not to mention the significant number of telehealth companies in the market already. Private companies such as Doctor On Demand, CareClix, and iCliniq all compete in the same space as Teladoc, and it wouldn't be surprising if many of them go public in the coming years.

However, Teladoc has an early mover advantage, which is all the more important considering the limited number of physicians in the country. As more telehealth companies enter the fray, the market could reach a point where a lack of interested physicians becomes the main factor hindering further growth.

Considering the fact that the U.S. is already expected to see a shortage of physicians in the coming years, competition for a limited number of medical experts could conceivably become the biggest problem for virtual-healthcare companies. In this respect, Teladoc has a considerable head start, boasting more than 50,000 medical experts in its network. 

Is Teladoc a buy?

While the sheer size of the virtual healthcare market means that competition is sure to spring up, Teladoc seems well-positioned to be a market leader in this sector. While still unprofitable, Teladoc is the leading company in a high-growth industry, and its financial figures are beating Wall Street's already bullish estimates.

If you're an investor comfortable with taking on a bit more risk in exchange for major growth potential, then Teladoc is a good investment for a high-risk, high-growth biotech portfolio. However, it would be wise to keep your initial position in this company pretty small until Teladoc gets closer to reporting a profit.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.