Since the beginning of the year, shares of digital health-management company Livongo Health (LVGO) have rallied by more than 200%. An initial investment of $10,000 in January would have grown to $31,360 as of July 6. That's incredible, considering the S&P 500 declined by about 2% during the same period.
As it turns out, the growth streak is far from over, as I believe Livongo has built an app with the potential to transform the lives of hundreds of millions of people living with chronic health conditions. Let's see why.
A remarkable innovation
There are currently 147 million adults in the U.S. living with a chronic condition, with 40% having more than one. Patients in this category account for 90% of the $3.7 trillion in healthcare spending each year, representing a vast medical need to be addressed.
Ready to address it is Livongo Health, a company dedicated to transforming the experience of patients living with chronic medical conditions. The company developed an app that has been crucial in helping patients manage diabetes.
The Livongo app is all-in-one software that can track blood pressure, blood sugar levels, weight data, and offer personalized coaching sessions to help patients accomplish their medical goals and reduce anxiety. Since 2017, the number of patients using the Livongo app has increased from 54,000 to 328,000 by the end of Q1 2020. The overall satisfaction rating for the app is 64, measured on a scale ranging from negative 100 to 100 (not 0 to 100), indicating a solid approval.
A solid business model
It is no wonder more and more people with diabetes are signing up for Livongo. Currently, patients who use the app saw a 0.8-point improvement in blood sugar levels, a 10-point improvement in blood pressure, and 7.3% weight loss. In addition, 55% of patients reported a decrease in depression and anxiety after use. All combined, the average patient saved over $1,900 annually in gross medical bills due to these reductions. That's a lot of money saved, literally at the click of a finger!
At the same time, Livongo Health's revenue grew by 68% year over year to $68.8 million in Q1 2020. The company is guiding for $300 million in revenue for fiscal year 2020 with break-even levels of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Moreover, the company has no debt and $368.2 million in cash and investments, putting it in a solid financial position.
Why the stock is a great buy
Unlike many companies that had their revenue and profitability creamed due to COVID-19, Livongo Health saw its business accelerate. The Centers for Disease and Control and Prevention estimates that 78% of COVID-19 cases come from the immunocompromised or those with serious chronic conditions. As a result, patients with diabetes are deferring checkups at local hospitals and clinics due to fears of contracting the coronavirus.
Therefore, the demand for a no-contact telemedicine app like Livongo's to keep track of diabetes and hypertension has increased dramatically. Guiding for 70% growth in a year when COVID-19 has caused severe havoc in businesses of all sectors is by no means a small feat. Hence, I think Livongo Health is a healthcare stock that will continue to reward investors.