The coronavirus pandemic has accelerated the adoption of telehealth services, and few companies are profiting from the trend more than Teladoc Health (NYSE:TDOC). Year-to-date, its stock is up 124%. The medical care platform provider could be overvalued; the company is not profitable yet, and is currently trading at 19.3 times sales and 15.5 times projected sales.

However, there is a strong argument that investors should look beyond those metrics. The telehealth industry has grown by 80% since last year, spurred on by the spread of the coronavirus, but could become more of a norm rather than a temporary trend. If Teladoc can continue to grow its business at its recent rates, its current share price will look like a bargain in five years. With that in mind, let's consider two reasons this stock could be a great addition to your portfolio. 

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The telehealth market is ripe for serious growth

The massive scope and convenience of Teladoc's services show that it's poised to benefit from industry growth. The company's telehealth platform allows patients to access many types of medical care from the comfort of their own homes at any time. Of course, there are medical services that healthcare professionals can't offer remotely. But doctors can conduct many basic consultations via teleconferences and video chats, as well as make basic diagnoses, prescribe treatments to their patients, or refer them to specialists for additional services.

It takes serious resources to provide large numbers of patients access to the 50,000 qualified healthcare professionals in the company's network, and Teladoc has the financial footing necessary to continue this synergy. Note that the company generates revenue in two ways. Teladoc charges per-visit fees for customers who use its services, and it also charges fees to insurance companies that offer telehealth services to their clients. During the second quarter, the total number of patient visits grew by 203% to 2.8 million, and its revenue rose by 85% to $241 million.

Businessman looking into a crystal ball.

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While Teladoc's recent results have been boosted by the pandemic, its long-term thesis is even more exciting. In many respects, Teladoc stands alone in telehealth: Most of Teladoc's competitors are private and the market remains severely under-penetrated by new competition. According to the research firm Arizton, revenue within the U.S. telehealth industry is expected to top $25 billion by 2025, up from the roughly $10 billion it will generate this year. The market abroad could be even larger. Teladoc estimates that it could serve about 1.1 billion people in highly developed countries.

The company currently has access to a tiny fraction -- about 1% -- of this population. Teladoc's international operations base is in Spain, and it offers virtual care services throughout Europe, South America, and Asia. The company is already well-positioned to profit from a quickly growing market in the U.S. and abroad.

The acquisition of Livongo Health 

On Aug. 5, Teladoc announced that it would acquire Livongo Health (NASDAQ:LVGO) in a cash and stock transaction valued at $18.5 billion. Investors didn't like the deal -- shares of both companies dropped by more than 10% following the announcement. The market wasn't pleased for some valid reasons, but I believe the acquisition spells excellent news for Teladoc in the long-term. Livongo Health provides personalized health coaching and tips to people who suffer from chronic health conditions, particularly diabetes. The company also allows patients to track their health information, like blood sugar levels, and share that information with their family and physicians.

By analyzing a wealth of data and using it to guide patients, the services allow people to better manage their chronic health conditions, a task that can otherwise be difficult, costly, and time-consuming. During the second quarter, 410,000 patients used its diabetes services, up 113% year-over-year. Those users represent a small fraction of the 34.2 million people with diabetes in the U.S. alone. In other words, Livongo, like Teladoc, has significant room to grow its customer base and revenue. Teladoc has added a significant growth driver to its already impressive prospects with its purchase of Livongo Health.

What's next? 

The path forward is not without its obstacles. As mentioned above, Teladoc is still unprofitable, and so is Livongo Health. There are other big players who could pose a threat in the telehealth market. Amazon (NASDAQ:AMZN) launched a telehealth platform dubbed Amazon Care last year. Though it debuted as a service for its employees, the tech giant could open it to the public at large. Given Amazon's resources, web services expertise, and brand power, it could attract a significant number of customers. No matter what, Teladoc is bound to encounter new competitors as businesses recognize opportunities in telehealth. Even with these caveats, I think Teladoc is well-armed against even the biggest and baddest competitors.

While profitability may take a few years to achieve, the rate at which the company is growing its revenues and the market opportunity overrule that concern. And while no one wants to have to compete with Amazon, Teladoc is already building a network of physicians and virtual care practices, and it will be hard for the e-commerce giant to knock the incumbent out of the way. Given these factors, Teladoc certainly looks like a growth stock that hasn't peaked yet, and investors who purchase shares now will be happy they did down the road. 

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.