Teladoc Health (TDOC -2.63%) shares have crumbled 65% in the past year as compared to the S&P 500, which has returned 7% over the same time frame. The company's decline in value is part of a broader tech sell-off related to rising interest rates, inflation, and fear surrounding the war in Ukraine. Investors are also concerned that the telehealth leader may not satisfy expectations in a post-pandemic world, due to both rising competition and lack of demand for its services.
But telehealth is not a fad, as evidenced in the company's most recent earnings report. As threats from COVID-19 continue to fade, consumers are still excited about the comfort and convenience that online medical visits offer. I consider Teladoc's latest pullback a unique buying opportunity for prudent investors. Let's explore Teladoc's fundamentals and see why the company is a worthy stock to buy in today's market.
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Teladoc's fundamentals are only upgrading
Teladoc continues to make headway toward profitability. Boasting 54 million paid U.S. members, the company grew revenue by 86% to $2.03 billion in 2021. Total visits eclipsed 15.4 million, or 38% growth year over year. Equally important to expanding its member base, Teladoc continues to drive more sales per customer. As of its most recent quarter, the company generated an average revenue per member of $2.49, translating to 53% growth from a year ago.
Taking into account management's guidance, analysts are modeling a top line of $2.58 billion in fiscal year 2022, representing 27% growth year over year. The company is also expecting total visits in 2022 to increase by up to 30%. As Teladoc continues to identify ways to monetize its members, the company will get closer to achieving profitability.
Investors will need to be patient regarding Teladoc's journey to a positive bottom line, but the company is certainly making great strides. In 2021, Teladoc reported a loss of $2.73 per share, a marked improvement from its $5.36 loss in 2020. Wall Street expects that to improve still further in 2022, forecasting Teladoc's per-share loss will be $1.58, another step closer to a positive net income. While it's probable that Teladoc won't become profitable for several years, it's comforting to know that the company has consistently demonstrated progress.
There's room for more than one in the telehealth industry
Teladoc bears argue frequently that competition will wipe Teladoc off the map. Traditional healthcare providers and tech companies like Amazon pose a threat to Teladoc's market share, but the industry is vast enough to support several secular winners. In fact, I'd argue that the decision by Amazon -- one of the world's most renowned tech enterprises -- to enter the telehealth arena further solidifies the validity of the market's long-term potential.
According to Globe Newswire, the global telehealth market is set to expand at a compound annual rate of 19% to $225 billion by 2030. If Teladoc can capture just 5% of the market by then, it will generate annual sales of $11.25 billion, or 554% higher than its 2021 levels. Hence, it's clear that the market can accommodate more than one success story. And given that Teladoc serves as an industry leader today, it is well-equipped to benefit from the rising trends.
Favorable valuation today
The recent slump in Teladoc's stock has left the company's valuation at all-time lows. Today, the stock is trading at five times sales, far below its five-year average of 14.1. This is notable given that Teladoc's top line grew over 80% in 2021 and is forecast to increase nearly 30% this year.
Teleadoc Health Inc price-to-sales ratio data by YCharts.
Yet, Teladoc's fundamentals have been largely unaltered; in truth, you could say that the company is in a stronger position today than it was a year ago. For that reason, Teladoc's current valuation is extremely enticing, and investors should take notice.
Long-term investors should hop on board
Teladoc is a prime example of a fundamentally sound company that has been crushed by broader macroeconomic headwinds. It is a true pioneer of telehealth, an industry that is designed to last. Competition is inevitable in a market with this much potential, but the massive opportunity should allow multiple companies to flourish over the long run. I'm confident that Teladoc will be one of those companies, and I advise investors to consider the stock closely today.
