Since closing at an all-time high of $107.30 on Sept. 3 last year, The Joint Corp. (JYNT 1.41%) has seen its shares tank 67% as of March 30. As a result of the Federal Reserve's planned interest rate hikes, investors have soured on high-multiple, high-growth stocks, a category this business has certainly belonged in.
But with still-strong fundamentals supporting the company, I think this booming nationwide operator and franchisor of chiropractic clinics, whose stock has crushed Bitcoin in 2021, can easily double your money by 2027. Let's take a closer look at this top small-cap stock.
Differentiated chiropractic care
Compared to traditional chiropractic offices, The Joint Corp. provides patients with only a basic spinal adjustment performed by a licensed chiropractor. There are no appointments necessary, no insurance, and patients can be in and out in as little as five minutes. The Joint Corp.'s average price of $33 per visit is significantly lower than the industry's cost of $77.
Handling quick, basic adjustments, as opposed to more complex back conditions, allows the company to treat more than twice as many patients per month as regular offices. And because locations don't accept insurance, there is no need to hire administrative staff. Plus, chiropractors only need a bench to perform adjustments, so there's no expensive equipment.
This setup means lower operating costs, supporting strong unit economics. In 2021, the cost to open a new clinic was roughly $276,000, while the average location generated more than $500,000 in annual sales volume by the third year. Franchisees can expect an outstanding payback period of just three and a half years.
Massive growth opportunity
The Joint Corp. went from having only 12 total clinics at year-end 2010 to 706 today. And during that 11-year stretch, systemwide sales surged at an annual rate of 67%. In 2021 alone, the business opened 32 net new company-owned locations and 95 franchised locations. Same-store sales jumped 29% year over year, demonstrating a business that is absolutely flourishing right now.
Management is extremely optimistic about the trajectory of the company as it is forecasting 1,000 total clinics by year-end 2023 and a potential long-term target of 1,950 in the U.S. With 156 franchise licenses sold in 2021 and 283 clinics currently in development, management's goal is certainly achievable.
The domestic chiropractic industry is highly fragmented, with some 40,000 independent offices representing 96% of the $18 billion market. The Joint Corp.'s $361 million in 2021 systemwide sales accounted for just 2% of the total. According to the company, 50% of Americans don't even know what the word "chiropractic" even means, leaving a large opportunity to acquire new customers.
An attractive entry price
Thanks to the stock cratering over the past few months, investors can buy shares of The Joint Corp. at a time when pessimism surrounding the business is through the roof. The current price-to-sales ratio of 6.6 is far cheaper than where the stock traded for most of 2021. And as the business continues to scale by opening new clinics, net income is poised to soar.
It's difficult to find an explanation for why a company that continues to release impressive financial results each and every quarter has had a stock price that keeps falling. Investors should ignore the recent share performance and instead adopt a long-term mindset by focusing solely on the fundamentals, which couldn't be better.
Based on the company's remarkable success in recent years, a huge growth runway, and a beaten-down stock price, I think The Joint Corp. could double investors' money over the next five years.