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Can Investing in GoodRx Make You Rich?

By Adria Cimino – Sep 24, 2020 at 10:00AM

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The newly public company helps consumers save money on prescription drugs -- and that may lead to investors making money on the shares.

In the world of IPOs, the company everyone has been talking about lately is Snowflake (SNOW 7.80%), the cloud data warehousing specialist whose stock more than doubled on its first day of trading last week. But the healthcare industry just had an exciting initial public offering of its own. Shares of GoodRx (GDRX 18.35%), a company that helps consumers find the lowest prices on prescription medications, soared by 53% on Wednesday, their first day of trading.

The company had targeted a range of $24 to $28 for the initial public offering, but when it occurred, it priced at $33. If you bought 100 shares at that IPO price, your initial $3,300 investment would now be worth $5,050. Now the question is: If you buy GoodRx shares at today's levels, can the stock make you rich?

A woman reaches into her wallet filled with $100 bills.

Image source: Getty Images.

Finding the lowest price

The company's future looks promising as U.S. drug prices continue to climb. According to a 2019 Consumer Reports survey, about 30% of Americans who take prescription medications saw their out-of-pocket expenses for them rise during the prior year. GoodRx offers a partial solution. It tracks prices at more than 70,000 pharmacies across the country. Through the GoodRx app, consumers can find the lowest prices in their area and use the company's coupons at pharmacies to get better deals. The service is free of charge to users; GoodRx makes its money through referral fees and advertisements on its website.

The company says it has already helped Americans save more than $20 billion. And of all of the medical apps on iTunes and Google Play, GoodRx is the one that people download the most.

GoodRx also has taken steps to expand into the world of telemedicine. Last year, it acquired HeyDoctor, which connects patients with doctors for online visits. Its services are limited compared with those offered by market leader Teladoc Health (TDOC 1.72%), but there may be room for more than one player in the field. The U.S. telemedicine market is growing at an 18.5% compound annual rate, according to Global Market Insights.

As for earnings, GoodRx has been profitable on an annual basis since at least 2016, a filing shows. And in the first half of 2020, the company said net income rose 77% year over year to $55 million.

A risk to consider

All of this sounds great. But one risk to the company that investors should consider is the possibility of national healthcare reform that impacts drug prices. GoodRx shareholders should closely watch developments on that front.

If reforms don't change the healthcare system, the future looks bright for GoodRx. And if it even partially follows in Teladoc's footsteps, investors will cheer. Teladoc's share price has risen 995% since its IPO in 2015.

GoodRx possesses some of the key elements for success: profitability, an expanding market, and popularity among users. That combination might be the prescription to make an investor rich.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Teladoc Health. The Motley Fool recommends Snowflake Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

GoodRx Holdings, Inc. Stock Quote
GoodRx Holdings, Inc.
$5.16 (18.35%) $0.80
Teladoc Health Stock Quote
Teladoc Health
$29.00 (1.72%) $0.49
Snowflake Stock Quote
$154.04 (7.80%) $11.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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