Even the greatest stocks can reach a time when their best days are behind them. After consistently delivering tremendous gains, they run out of steam, often because their valuations increase way above what their growth prospects justify. When this happens, these one-time winners are no longer good picks for investors.

Teladoc Health (TDOC -1.32%) has all the makings of a great stock. Its shares are up more than 660% since Teladoc's initial public offering in July 2015. More than half of that gain was generated this year. 

But the telehealth services provider remains unprofitable while its valuation is near all-time highs. Some worry that the demand for telehealth could decline once the COVID-19 pandemic ends. Is it too late to buy Teladoc stock?

An older person looking a physician on a laptop screen

Image source: Getty Images.

Looking at a glass half empty

Pessimists view a glass of water as half empty, while optimists see the same glass as half full. Let's first look at Teladoc as the half-empty glass.

The obvious place to start is Teladoc's valuation. After its huge run this year, the healthcare stock now trades at nearly 23 times sales. That's a nosebleed level for nearly any stock.

It's important to consider the reason behind this premium valuation. Teladoc's share price has skyrocketed as more people have begun using telehealth during the COVID-19 pandemic. This surge in demand made sense during the periods when lockdowns and shelter-in-place regulations were in effect. However, as restrictions have eased, more individuals have resumed seeing doctors in their offices.

In addition, Medicare relaxed some telehealth restrictions because of the pandemic. There's a potential risk for Teladoc if those restrictions are put back into effect once the coronavirus crisis is over.

At the same time, Teladoc faces stronger competition. AmWell recently conducted its IPO and now has a lot of cash to use in expansion. It's a similar story for GoodRx, which is best known for its digital coupons for prescription drugs, but which also runs a telehealth service. 

A full-to-the-brim reality

Teladoc stock does trade at a premium valuation. Sure, there are some uncertainties about what might happen with Medicare's telehealth restrictions once the pandemic is over. And yes, Teladoc faces plenty of rivals that are arguably in better positions now than in the past. However, there's a good argument to be made that Teladoc isn't just a glass of water that's half full; it's actually full to the brim.

Let's first address the concerns about Teladoc's future after the pandemic ends. Surveys conducted in recent months by Accenture and The Harris Poll found that a majority of Americans plan to keep using telehealth even when the healthcare crisis ends. Eighty-nine percent of respondents to The Harris Poll's survey stated that the COVID-19 pandemic has made telehealth "an indispensable part of the healthcare system." 

It's possible that Medicare could reinstate limitations on telehealth, but I think it's just as likely that the federal program could recognize the value that telehealth offers and expand its use for Medicare beneficiaries.

As for Teladoc's high valuation and stronger competition, there's one factor that could make both issues largely irrelevant: the massive untapped opportunity in telehealth. Teladoc estimates that its addressable market in the U.S. alone is close to $74 billion. That's a big enough market to allow Teladoc to grow much larger and for several other companies to achieve significant success as well.

Note also that Teladoc should have an even larger opportunity once its pending acquisition of Livongo Health (LVGO) closes. Livongo has the leading digital health platform for helping individuals manage their chronic conditions. Its addressable market in the U.S. is around $47 billion for diabetes and hypertension. 

A long way to go

Any stock should be evaluated based primarily on its future prospects rather than its past. My view is that the future for Teladoc Health looks brighter than it ever has. The adoption of telehealth is accelerating in the U.S. This growth should expand to international markets as well. Teladoc's acquisition of Livongo will make it arguably the most formidable player in virtual care.

The bottom line is that it isn't too late to buy Teladoc stock. This telehealth leader should still have a long way to go before it runs out of steam.