Telehealth company Teladoc Health (TDOC 4.58%) has been having a rough year. In the past 12 months, its share price has fallen a mammoth 77% while the S&P 500 is up by 9%. But how a stock performs doesn't always align with how well a company is doing.
Teladoc's business remains strong with plenty of growth still on the horizon. Investors counting out the stock today could be making a terrible mistake in underestimating the business and its sound fundamentals. Here's why Teladoc may be one of the best growth stocks to buy entering March.
There were many positives from Q4
On Tuesday, Teladoc released its fourth-quarter and year-end results for 2021. For the period ended Dec. 31, its total visits jumped to 4.4 million, up from 3.9 million in the previous period. That's a new record for Teladoc, and it's perhaps a bit unsurprising given the emergence of the omicron variant during the quarter. But Teladoc is still expecting to build on those numbers, projecting that visits could top 4.5 million in the next quarter -- indicating that it does not see a large drop off in volumes ahead.
As a result of the strong increase in the number of visits, the company's sales of $554.2 million were up 6.2% from the $522 million that Teladoc reported in the previous quarter. Next quarter, the company projects its top line will come in between $565 million and $571 million, representing an increase of about 2.5% at the midpoint. While that's a relatively modest increase, the company expects to generate between $2.55 billion and $2.65 billion in sales for all of 2022, which would be approximately a 28% increase from the $2.03 billion it reported in 2021.
That growth combined with improving profitability makes Teladoc an attractive growth buy. This past quarter, the company's operating loss was $41.4 million vs. a $60.6 million loss in the previous quarter. Plus, it generated $194 million in cash from its operating activities during the year -- in 2020, it was still burning through cash. That's particularly important for investors who may be concerned about a growth stock in an environment of rising interest rates. With strong cash flow, Teladoc will be less likely to need to raise cash and dilute its shares than a cash-burning business would.
Its Primary360 business is just getting warmed up
Teladoc's progress is encouraging, but its long-term growth story is still only beginning. On its earnings call, further positives were mentioned to convince long-term investors that the business will be even stronger in the future. CEO Jason Gorevic stated that its new Primary360 product, which gives patients a dedicated care team that's available 24/7, "is off the charts with 95% member satisfaction."
This shouldn't come as too much of a surprise for Teladoc investors as the company has been known for focusing on its customers and providing quality service. Last year, J.D. Power conducted a telehealth satisfaction survey in which Teladoc received the top ranking across all subcategories -- including customer service.
The positive rapport the company is building with its customers is one of the reasons I'm not worried about Teladoc. While there may be competition in the field and telehealth is something other companies could offer, doing it well and keeping customers happy can help separate Teladoc from the pack. It also gives investors hope about the potential success for Primary360, which the company says now has 50 corporate clients live on its platform -- several of them on the Fortune 500 list.
At its current price, the stock could be a steal of a deal
More than 90 million people are using Teladoc's platform. The company is optimistic that it can continue to build on that number by leveraging its existing customer relationships and focusing on broader solutions that cover mental health and chronic care.
Teladoc's business seems to be on the right track, regardless of what bearish short-sellers may have you think. The healthcare stock hasn't been this cheap since 2019, and the lower it goes, the better of a buy it becomes. For investors willing to buy and hold, there could be substantial gains to be made from hanging on to Teladoc. Even with lowered price targets, many analysts still see the stock rising to at least $100.