Teladoc Health (TDOC 2.46%) soared during the early stages of the pandemic -- and for good reason. People stayed home more and favored telemedicine appointments over in-office ones. As a result, Teladoc's business boomed, with revenue and visits climbing in the triple digits.
Since then, Teladoc has maintained strong levels of growth. Revenue and visits have gained in the double digits quarter after quarter. But big goodwill impairment charges last year and the company's lack of profitability have hurt investors' appetite for the stock.
Does this mean it's too late to buy? Let's find out.
Billion-dollar impairment charges
First, let's take a look at Teladoc's problems. The company disappointed investors when it reported billion-dollar noncash goodwill impairment charges spread out over three quarters last year. Teladoc reported a total of $13.4 billion in these charges, linked to its 2020 acquisition of virtual chronic care specialist Livongo.
This drove Teladoc to a $13.6 billion net loss for the year, compared to a loss of about $428 million in the prior year. This clearly is a setback along the path to profitability.
That said, we also can look at this from another perspective. Last year was a difficult one, due to these charges and general economic pressure. But the worst may be over.
Earlier this year, Teladoc launched efforts to reorient its strategy to favoring revenue growth and profitability. As part of these efforts, the company is focused on efficiency and is working to improve its cost structure. The aim is to match the cost structure to the business' growth rate right now. Its first step was to cut 300 jobs and office space in certain locations.
Meanwhile, demand for Teladoc's services continues. The company's revenue advanced 15% in the fourth quarter, and online visits climbed 8%. Teladoc also reported year-over-year growth for both its integrated care business and its BetterHelp mental health offer. The company sells integrated care plans -- offering everything from primary care to specialist visits -- to employers and BetterHelp services directly to consumers.
Growth in chronic care
Teladoc also has increased U.S. integrated care members and BetterHelp paying users. And chronic care program enrollment climbed 16% in the quarter. Though Teladoc's purchase of Livongo has weighed on earnings so far, the idea of strengthening the chronic care business is a wise one.
Teladoc has said a variety of chronic care offerings can be linked to member retention. For instance, the company found retention was 10% higher after a year for those enrolled in the diabetes program and at least one other program versus those enrolled in diabetes only.
The company forecasts 2023 revenue growth in the range of 6% to 11% and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 12% to 32%. While revenue rose last year, adjusted EBITDA fell.
It's also important to keep in mind that Teladoc still is early in its growth story. Yes, the company serves more than half of Fortune 500 companies. Even considering that, the platform only is available to 80 million Americans today. That's out of about 298 million U.S. insured lives.
At the same time, the telemedicine market is set to grow in the double digits this decade. All of this means there's room for Teladoc, already a leader, to extend that lead.
Now let's talk valuation. Teladoc shares are trading at 1.7 times sales. That's around their cheapest level ever by that measure. And it looks like a great bargain, considering the company's prospects.
All this means it's not too late to buy Teladoc. The company could be heading for a whole new phase of growth. That said, Teladoc shares might not truly take off until the company shows clear progress on the path to profitability. Risk remains.
But if you have some risk tolerance and are looking for a high-growth opportunity, Teladoc could be just the right stock for you.
