Virtual healthcare company Teladoc Health (TDOC 0.50%) has been a volatile stock for investors over the past several years. Pandemic lockdowns gave the business a considerable boost, and management seized the moment by acquiring Livongo for $18.5 billion in cash and stock in late 2020.

Livongo's remote monitoring business was supposed to give Teladoc an all-in-one service whereby patients could get an assortment of virtual-care services. However, the marriage hasn't gone well. After numerous write-downs, Teladoc trades at a fraction of what it paid for Livongo in the first place.

Is Teladoc salvageable for long-term investors? There's still potential here, but Teladoc must prove itself. Here is the bear and bull argument for Teladoc stock moving forward.

Bear: Management has poorly overseen the business

The Titanic was seen as the world's greatest ship in the early 1900s, but mistakes by those running the ship ultimately doomed it to sink. It's similar in business; most companies can fail under poor management even if the business itself is promising.

Teladoc was a promising company entering 2020; it grew revenue and patient visits by 64% in 2019 and memberships by 32%. Meanwhile, Livongo was growing memberships by 75% year over year in the second quarter of 2020, driving 125% revenue growth for that quarter.

But the combined company has dramatically tailed off since the merger closed. Livongo specializes in monitoring chronic care conditions like diabetes; you can see below that chronic care program growth has slowed to 16% year over year in Q4, a sharp deceleration in just two years.

Teladoc key operating metrics as of Q4 of 2022.

Image source: Teladoc Health Q4 2022 investor presentation.

Teladoc's total 2022 revenue was $2.4 billion, an 18% increase over 2021. You can blame some of this slower growth on tough comparables; a pandemic-driven growth spurt meant the numbers wouldn't look as impressive the following year.

However, management has formally acknowledged its mistakes in buying Livongo by writing down the value of its assets. Management wrote off $13.7 billion of Livongo's value in 2022. That's a disaster considering the debt and dilution that shareholders bore as part of the deal. The combined company has a market value of just $4 billion today.

For some, Teladoc's destruction of shareholder money is an unforgivable sin. That's an understandable take and helps explain why shares are down more than 90% from their highs today.

Bull: Teladoc remains a market leader in a growing industry

But there's a glass-half-full side to this argument. Now that the stock has been battered, and the write-downs are (hopefully) over, can Teladoc generate strong investment returns over the long term? Yes, Teladoc's growth has slowed, but it's not shrinking. Revenue did grow 18% in 2022, and management is forecasting additional top-line growth in 2023, with early guidance at $2.55 billion to $2.67 billion. Additionally, the business has been free-cash-flow positive over the past year.

TDOC Revenue (TTM) Chart

TDOC Revenue (TTM) data by YCharts.

From an operating standpoint, Teladoc has still built up a large user base that remains intact. Integrated users grew 7.4% year over year to 83.3 million in Q4, and specialty segments like BetterHelp, which focuses on mental health, grew members by 28% year over year to 450,000. Teladoc grows its members through employer-sponsored health plans by partnering with insurance companies like Aetna.

This leadership position could help Teladoc continue capturing growth as telehealth becomes more broadly used. According to Grand View Research, the global telehealth market was worth $83.5 billion in 2022 and could grow by an average of 24% through 2030. The company is generating free cash flow and has $918 million in cash on hand, so management doesn't have to issue new shares at low prices to raise money. Livongo does have $1.5 billion in debt (mostly from the Livongo deal), so that's something to keep an eye on.

At a price-to-sales (P/S) ratio of 1.6, the stock is the cheapest it's ever been. In other words, the market has priced in all the bad news. As Teladoc moves forward, growth and stabilizing financials (no more write-downs, please) could give the stock the boost it needs to be an eventual winner.