What happened

Shares of Teladoc Health (TDOC -1.52%) shot 5.1% higher as of 2:05 p.m. ET on Friday after growth investing star Cathie Wood revealed continued active purchases of the telemedicine pioneer's stock on Thursday.

And not a little buying, either. According to her Ark Invest website, the Ark Genomic Revolution ETF (ARKG -0.98%) and Ark Innovation ETF (ARKK -2.12%) funds purchased a combined 125,702 shares of Teladoc yesterday.

So what

Wood's funds haven't exactly been on a winning streak lately. Over the past year, ARKG shares are down 26%, while ARKK is off 42%. For its part, Teladoc stock is down 60%.

And yet, many growth investors still look to Wood for clues to which way the tech winds are blowing. If she's buying Teladoc stock for Ark, they figure, then maybe a 60% discount is cheap enough for them to buy back into Teladoc as well? Especially when you consider that Thursday wasn't the only day Wood was buying Teladoc?

Because as it turns out, on Monday and Tuesday this week, her funds snapped up 160,623 more shares of Teladoc, bringing the funds' total purchases for the week to more than 286,000 shares.

Now what

Maybe Wood is right to be buying Teladoc -- or maybe not. On the plus side, while Teladoc reported generally accepted accounting principles (GAAP) losses of nearly $9.9 billion last year, from a cash profits perspective, the company actually isn't looking all that sick. Free cash flow (FCF) through the first three quarters of 2022 was a respectable $113 million, up modestly from $105 million in the first nine months of 2021. Over the past 12 months, Teladoc has generated $194 million in positive cash profits.

Still, relative to Teladoc's $5.2 billion enterprise value (EV), that works out to 26.8 times FCF valuation on the company. While that might not seem like too much to pay for a fast-growing company, estimates by S&P Global Market Intelligence show that Teladoc is likely to grow its sales only about 12% annually over the next three years, with free cash flow growing even slower -- and no GAAP profits at all.

Maybe the analysts are wrong about that. Maybe Wood is right and Teladoc will grow faster. But if they're right and she's wrong, then an investment in Teladoc today is going to cost you a pricey 2.2 times EV/FCF/growth. If you ask me, that's anything but a slam dunk.