Hims & Hers Health (HIMS -0.17%) is up 30% over the past month. In this market it's hard to believe, but the stock has had a great month, even if it remains 75% off of its peak.
It seems like green turns red quickly in this market, but Hims & Hers could shake that trend and continue climbing. Here is why the stock's 30% climb may just be the beginning.
Pummeled to a pulp
Hims & Hers brands itself as a telehealth company, but there's more to it than that. Yes, the company provides telehealth services, where patients can digitally meet with healthcare professionals for several ailments and even receive prescription treatments.
But the company is also a brand, selling prescription and over-the-counter products under two brands: Hims for men and Hers for women. It sells directly to consumers through its online store, app, and 13 retail partners, including CVS, Walmart, and GNC.
However, Wall Street has soured on the stock; shares have fallen 75% from their peak. The stock's valuation has fallen to a price-to-sales ratio (P/S) of under four, even after its recent rebound.
HIMS PS Ratio data by YCharts
Sometimes a company trips up, and it's clear why the share price tanks. But short-term stock prices can be irrational; it can feel like the market is a daily compilation of knee-jerk reactions. A company's fundamentals can help you clear the smoke and see the big picture.
Will the good times continue?
Hims & Hers is undoubtedly growing. Even as some peers have been struggling, the company has continued to produce tremendous growth. You can see below that revenue growth has accelerated, not decreased:
HIMS Revenue (TTM) data by YCharts
Hims & Hers is also executing, beating revenue estimates all six quarters since going public and raising guidance along the way.
It just launched a smartphone app in January 2022, and the company's most recent quarter, ended March 31, 2022, produced a whopping 81% increase in subscriptions.
Investors will want to see how growth holds up as consumers begin cutting back on their spending in the softening economic environment. However, even if a recession slows business, Hims & Hers is financially stable enough to endure the storm:
HIMS Free Cash Flow data by YCharts
The company is debt-free and has more than $203 million in cash on hand, enough to last years at its current cash losses.
Add it all together, and you have a growing business that's consistently beating estimates, raising the bar, and has enough cash to survive any bumps along the way. Prices can fluctuate in the short term, but strong fundamentals like this could mean that the share price keeps rising over time.
Hims & Hers is just getting started
Investors likely haven't missed their chance, even with the stock's recent momentum. Healthcare is one of the largest industries in the world, a $4 trillion-per-year business in the United States alone.
There are 332 million people in the U.S., and the company's 710K subscriptions are just a drop in the ocean. Is there competition? Of course -- traditional healthcare players and other start-ups will be there. But one could argue that there's plenty of room for multiple winners, and Hims & Hers' success shows at the very least that customers embrace its brand and products.
This is still a business with an enterprise value of just $1 billion. If Hims & Hers can maintain solid growth over a multi-year period, it's hard to envision the stock not following the business to higher heights.
