Healthcare is a brutally competitive field, especially in the United States, where the stakes are high. Healthcare contributes a whopping $4.3 trillion to the country's economy.

Small competitor Hims & Hers Health (HIMS 5.16%) keeps shining, posting enormous growth figures quarter after quarter. The stock has soared 235% over the past year, making it one of Wall Street's best performers.

Buying a stock after appreciating so much in such a short time screams FOMO (fear of missing out), but fear not. The stock is just getting started -- here is why Hims & Hers is poised to continue crushing the market moving forward.

Can't stop, won't stop

Hims & Hers provides direct-to-consumer healthcare products and services through its telehealth website and smartphone apps. Patients can consult with professionals and purchase prescription and over-the-counter drugs as needed. The company operates two platforms: Hims for men and Hers for women. Patients can seek treatment for various conditions, including sexual health, mental health, skincare, and hair loss.

Perhaps, one could argue Hims & Hers offers nothing proprietary, and there are other, larger companies offering direct-to-consumer services. But Hims & Hers' execution is getting undeniable results. The company's branding and user experience are winning customers, shown by stellar subscriber growth that's gone on for many quarters.

Hims & Hers Health subscriber count and revenue as of Q1 2023.

Image source: Hims & Hers Health. YOY = year over year.

Subscribers grew 87% year over year in Q1, and revenue followed right along. Revenue per user grew $3 over Q1 2022 and could improve as cross-selling opportunities present themselves. It's tough to deny the brand has juice with consistent growth at these levels, which hasn't yet shown much sign of slowing.

Hims & Hers could become very profitable...eventually

Many growing companies get flack from investors if they aren't turning a profit. Hims & Hers is only profitable on a non-GAAP (non-generally accepted accounting principles) EBITDA (earnings before interest, taxes, depreciation, and amortization) basis today, but knocking the stock for that is arguably shortsighted. The reality is that Hims & Hers could become a cash cow, and here's how.

First, the business works on very high gross profit margins of 80%. Margins improved 6 percentage points year over year in the first quarter, so they continue improving. These are profit margins you typically see from software companies, so Hims & Hers is doing very well here. Marketing expenses are the primary reason Hims & Hers is losing money today; it spent just over half its revenue on marketing expenses in Q1.

Hims & Hers Health Q1 2023 profit and loss statement.

Image source: Hims & Hers Health.

Marketing expenses were $97 million in the quarter resulting in operating losses of $11 million. Management could easily trim marketing spend and quickly make the business profitable. So why isn't it? Hims & Hers is retaining 85% of its users after two years and states that it pays back customer acquisition costs in under one year. Acquiring as many customers as possible is justified when they are that sticky and generate such high gross margins for the business.

The company also has the money to be aggressive. It has zero debt on the books and roughly $180 million in cash. The business added cash to the balance sheet in Q1, so it's not operating recklessly. Eventually, Hims & Hers can ease off marketing spend, and that cash should flow to the bottom line. This looks like a financially strong business model.

The stock still looks cheap despite its hot streak

Price anchoring is a common mistake many investors stumble on. Just because something falls from $50 to $5 doesn't necessarily make it a good value, and vice versa. Hims & Hers has risen from just over $2 per share to more than $11 today. But that doesn't necessarily mean the fun is over.

You can see below that valuing the stock by its enterprise value against its revenue will show that it's still among its cheapest since going public -- despite the massive rise off its lows. That's because revenue is growing so fast that it offsets a lot of the share price appreciation. Wait a year, and the stock will become even less expensive, and that's not factoring in Hims & Hers' budding track record of exceeding growth estimates.

HIMS EV to Revenues (Forward) Chart
HIMS EV to Revenues (Forward) data by YCharts. EV = enterprise value.

I'm not arguing that Hims & Hers will keep appreciating as it has over the past year. It seems the market was excessively pessimistic about the stock, and some of that is coming undone. But if you can buy and sit tight for a few years and the company continues executing as it has since arriving on Wall Street, Hims & Hers could be a very rewarding investment.