To compete in a tight labor market, employers are looking to add benefits that will recruit and retain employees. Fertility benefits company Progyny (PGNY -2.20%) is riding this tailwind and has built up a credible history of data to back its claim that it provides superior clinical outcomes.

Now the company looks set to continue its remarkable growth.

Showing the value of a managed treatment plan

Infertility is a common problem, with 19% of women struggling to conceive and 12% taking advantage of some form of infertility service. Progyny offers a network of provider specialists and assigns an in-house expert to support members as they undergo fertility treatments. The company believes that its approach ensures the best possible medical care for members while also reducing costs for employers.

The numbers bear out Progyny's claims. Because it operates through a pre-screened network of specialists, rather than a reimbursement program, as is common for many fertility benefits programs, the company is able to track statistics throughout the treatment process. Embryo transfer and pregnancy rates are well above the national average, while miscarriage rates are lower. Effectively, this boils down to a 27% improvement in the live birth rate.

This allows members to realize their dream of parenthood through a faster, less stressful process. And it benefits employers by lowering the number of costly rounds of treatment. Furthermore, the multiples rate is about one-third that of the national average, which cuts down on the likelihood of premature birth and expensive ICU medical care.

Employees seek fertility benefits

Legislative changes could impact the company's outlook if abortion bans are extended to in vitro fertilization. Management sees Texas as the state with the greatest potential impact on Progyny's business but does not expect the state's trigger ban to affect fertility treatments. Texas currently offers multiple layers of protection -- the trigger ban only applies to embryos in the body, and the state also mandates that insurance offers coverage for fertility treatment. 

Progyny is diversified across more than 30 different industries, but a significant number of these clients are tech companies. In an industry that competes for highly skilled labor, fertility benefits offer one way for a company to differentiate itself from other potential employers. And as a benefit becomes commonplace across an industry, a company must offer that benefit to remain competitive. 

The rapid adoption of fertility benefits highlights just how widespread the interest is among employees. About 30% of employers with 500 or more employees offered some kind of fertility benefit in 2018, and this number has rapidly grown to 60% in 2022. And 70% of millennials and 88% of those experiencing infertility are willing to change jobs for fertility benefits.

More growth on the horizon

The company has steadily grown since its founding in 2016. Revenue has more than doubled in the past two years, growing from $229.7 million in 2019 to $500.6 million in 2021. Management projects a similar level of growth in 2022, with revenue increasing by 47% to 55%, very much in line with its annual rate of 48% since its October 2019 IPO.

Progyny will continue to grow as it adds new clients and increases the number of covered lives. The company targets large, self-insured employers with a minimum of 1,000 employees. The number of clients has grown year over year from 179 to 264 at the end of first quarter. The current member base of 4 million represents only about 5% of the approximately 75 million potential people within the target market, leaving plenty of room for further growth.

Progyny is also expanding its prescription pharmacy benefit that went live in 2018. The company takes a cut of prescriptions filled through its mail delivery network of pharmacy providers. Revenue from this segment has increased rapidly, by 84% year over year, as clients have added the Progyny Rx benefit to their plans.

Progyny's price-to-earnings ratio is high at 56, as expected for a company with strong growth prospects. However, this is near its lowest level of the past year, which makes it a good time to consider the stock. Overall, this is a profitable digital health company with a healthy growth outlook.