Healthcare is a massive part of the U.S. economy, a multi-trillion dollar industry filled with opportunity. However, many supposed "disruptors" have seen their stocks destroyed over the past year, and telehealth company Hims & Hers Health (HIMS 0.74%) has been no different.

Its sub-billion dollar market cap makes it a small fish in a big pond, so why should investors trust this company with their hard-earned money? Most big companies started small, and putting up strong performance is the best way Hims & Hers can "walk the walk."

It's earning season, so here are the three primary keys investors should be following as Hims & Hers gets ready for its first-quarter 2022 report.

Young person applying skin care lotion.

Image source: Getty Images.

1. Subscriber growth

Hims & Hers Health is a consumer-focused telehealth and products company. Users can consult with healthcare professionals on various topics, including men's and women's sexual health, hair loss, mental health, and more. Healthcare professionals can prescribe products to treat ailments, or users can buy several health supplements available on subscription plans.

There isn't anything proprietary about what Hims & Hers does. It competes with the traditional healthcare system, which includes visiting your local doctor when you're feeling unwell and fellow upstarts that offer a similar service, like private competitor Roman.

This may contribute to the market's hesitation to trust Hims & Hers, but the company keeps putting up numbers that suggest plenty of traction with consumers. From 2018, the company's first full business year, through the end of 2021, subscriptions have grown at an average of 66% per year. 

Perhaps more importantly, Hims & Hers grew its subscription count 95% year over year in 2021 to 609,000. In other words, subscriber growth is accelerating, despite growing from a more extensive subscriber base. The company formally launched its smartphone app in January, so investors will want to see whether Hims & Hers is sustaining strong subscriber growth early in 2022 and should look for notes from management on how the app is doing.

2. Financial progress

A company can rapidly grow, but the financials behind the business need to be solid, or it doesn't matter over the long term. So while Hims & Hers isn't profitable yet, the company shows financial promise.

The business generates 75% gross profit margins, higher than some software companies like Twilio. Strong margins have helped the company burn less cash, despite increasing investments into hiring, sales, and marketing to grow the company. EBITDA (earnings before interest, taxes, depreciation, and amortization) was negative $30 million in 2021.

Management is guiding for 2022 EBITDA of negative $30 million to negative $20 million, implying that losses could stabilize despite revenue growth. The company has $247 million in cash and short-term investments, so there is plenty of money to fund the business soon.

Investors should watch how this progresses throughout 2022; strong profit margins should help earnings quickly grow if revenue growth can keep outpacing what the company spends.

Additionally, the company is ramping up a wholesale business after striking partnerships with various retailers across America. Wholesale revenue could carry lower margins than direct-to-consumer subscriptions, so investors will want to watch how that impacts overall margins as wholesale grows from its current 5% of sales.

3. Setting a tone with guidance

Young companies lack a track record, so the market tends to pay close attention to how a business performs in its first few years on the public markets. Hims & Hers seems to have been under-promising and over-delivering, a good sign for investors.

The company repeatedly raised guidance throughout 2021 and came out on top at the end of the year. Furthermore, the company has beaten analyst revenue estimates in all five quarters since coming public.

Management has guided for 40% year-over-year revenue growth in 2022, which would be a massive slowdown from 2021, where it grew revenue 83% year over year. However, management initially guided for 37%, so investors will find out whether this vast beat was a fluke or if Hims & Hers is intentionally "sandbagging" its numbers.