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Better Coronavirus Stock: Livongo Health or Teladoc?

By Prosper Junior Bakiny – Jun 13, 2020 at 5:56AM

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Both of these stocks have been crushing the market despite the pandemic, but which is the better buy?

Most stocks have been pummeled amid the recent market crash caused by the COVID-19 pandemic. And although the stock market has rebounded over the past few weeks, we may not be out of the woods just yet. Another spike in COVID-19 cases or a negative jobs report in the coming months could sink the market once again.

Amid this chaos, some stocks have performed exceptionally well. Teladoc (TDOC -3.54%) and Livongo Health (LVGO) are two of those stocks that have beat the market since the beginning of the year. There are good reasons to think both companies are excellent picks for long-term investors, but which is the better growth stock to buy today? 

TDOC Chart

TDOC data by YCharts

The case for Livongo Health 

Livongo Health's novel approach to helping people manage chronic conditions -- particularly those with diabetes and hypertension -- has been a success so far, and the company's first-quarter financial results provided more evidence of this. During the quarter, Livongo Health reported total revenue of $68.8 million, representing an increase of 115% year over year. The number of members who are signed up for its diabetes services was 328,000, a 100% increase compared to the year-ago period.

With its business booming even amid the crisis, Livongo Health decided to revise its fiscal 2020 guidance. The company had previously announced that it expected its revenue for the fiscal year 2020 to be between $280 million and $290 million. Livongo Health now anticipates that its revenue for the year will be between $290 million and $303 million.

Livongo Health's long-term opportunities seem even more attractive. Roughly 147 million people in the U.S. have at least one chronic health condition, and about 40% of them have more than one. The market opportunity for Livongo Health in the U.S. alone reaches about $46.7 billion, which means the company has only begun to make headway within this market.

Man holding a briefcase standing in front of two diverging paths.

Image source: Getty Images.

But it's worth noting that Livongo Health is currently not consistently profitable. During the first quarter, the company recorded a net loss of $5.6 million, although that was significantly better than the $14.4 million net loss it recorded during the prior-year quarter. Even with red ink on the bottom line, I believe Livongo Health is an attractive stock to buy due to its market opportunity. Investors who purchase shares of this company will be glad they did in just a few years. 

The case for Teladoc 

Teladoc is the leader in the market for telehealth services, and the company's business has also been thriving amid the ongoing public health crisis. In March, Teladoc famously reported that its number of virtual medical visits had skyrocketed, and the demand for Teladoc's services will likely remain high for the foreseeable future. There's nothing quite like being able to receive medical attention at any time of the day and on any day of the week, without leaving the comfort of your home; that is what Teladoc offers.

During the first quarter, the healthcare company's revenue of $180.8 million increased by 41% year over year. Teladoc's total visits increased by 92% year over year to a little over 2 million. Teladoc isn't consistently profitable, and during the first quarter, the company's net loss was $29.6 million, compared to the net loss of $30.2 million recorded during the first quarter of 2019.

Looking forward, Teladoc's market opportunity is enticing. Telehealth services were hardly mainstream before the crisis, but now, the public will be significantly more likely to embrace this option. Teladoc is ideally positioned to profit from the growth of telehealth services, and I believe that the company's stock will continue to outperform the broader market.

Comparing their financials 

Teladoc's revenue of $180.8 million during the first quarter was higher than Livongo Health's revenue of $68.8 million. However, Livongo Health's year-over-year revenue growth -- which was 115% -- was significantly better than Teladoc's 41% year-over-year revenue growth. Livongo Health has consistently delivered revenue growth of more than 100% since it went public in July 2019, vastly outperforming Teladoc in this department. 

Neither company has consistently produced operating profits, but Livongo Health's gross margins have been better. During the first quarter, Livongo Health's 73.69% gross margin compared favorably to Teladoc's 59.97% gross margin. Furthermore, Livongo Health's net loss of $5.6 million wasn't as bad as Teladoc's $29.6 million net loss.

Lastly, Teladoc seems to be the more attractively valued of the two. Teladoc is currently trading for 16.8 times its future sales, whereas Livongo Health's forward price-to-sales ratio is 21.

Which is the better buy?

If I had to pick one of these two stocks today, it would be Teladoc. I think Teladoc's global market opportunity is more attractive than Livongo Health's, and as a result of recent events, Teladoc is in a better position than ever to pounce on this opportunity. With that said, I think long-term investors can't go wrong with either of these two healthcare stocks, and both deserve a place in your portfolio. 

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Livongo Health Inc and Teladoc Health. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$26.97 (-3.54%) $0.99
Livongo Health, Inc. Stock Quote
Livongo Health, Inc.

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