Teladoc Health's (TDOC -2.40%) stock has fallen by more than 30% over the past 12 months as it continues to struggle to gain momentum. The telehealth specialist isn't the hot investment it was during the early stages of the pandemic.
But while the momentum and hype appear to have waned, the fundamentals are still there. Four encouraging trends suggest that sooner or later, the stock should be able to turn things around. Here's why Teladoc can still be a promising investment to hold.
1. Revenue continues to grow by double digits
Teladoc's growth rate has fallen sharply in the past few years. That can happen to rapidly expanding businesses because sustaining a growth rate of over 50% is extremely difficult to do. But the company's expansion has been relatively stable in the past few quarters. For the period ended June 30, revenue of $652.4 million was still up 10% year over year. While that is down from the previous quarter, it's not a big decline in the growth rate.
Data source: Company filings. Chart by author.
2. Virtual visits have exceeded 4.5 million for six straight quarters
One thing investors may have expected to happen amid a return to normal in the economy is that virtual telehealth visits would decline. After all, if patients are making in-person visits to the doctor's office, there may not be much of a need for virtual visits. Teladoc's virtual visits have occasionally dipped, but for six consecutive quarters, the number has remained above 4.5 million.
It's a good sign of continued growth for the business and how far the company has come over the years. In 2019, Teladoc reported 4.1 million virtual visits for the whole year. Now, it generates more visits every quarter.
Data source: Company filings. Chart by author.
3. Cash flow has remained consistently positive
Operating cash flow is an important number for investors to focus on because if a company is burning through cash, it's not a good sign. It can mean that the business needs to issue shares or raise debt to keep its operations running.
In Teladoc's case, operating cash flow has been positive and fairly strong in all but one of the latest nine quarters. And last quarter it was $101.2 million -- the highest it has been over the past couple of years.
Data source: Company filings. Chart by author.
4. No impairment charge for two straight quarters
A big reason for investor frustration with Teladoc's stock last year was the company's continued impairment charges. It overpaid for Livongo Health when it spent $18.5 billion to acquire the chronic care company in 2020, and it wrote down goodwill heavily last year as a result. Through just the first two quarters of 2022, Teladoc's goodwill impairment totaled $9.6 billion. This year, however, it hasn't recorded any goodwill impairment thus far.
Data source: Company filings. Chart by author.
Teladoc could be a good buy right now
Shares of Teladoc Health are trading near their 52-week lows. This may be one of the best bargains in healthcare right now. The telehealth company's valuation has taken a beating due to impairment charges and a declining growth rate, but the business isn't in bad shape and it has been demonstrating some consistency lately.
At just 1.4 times revenue, Teladoc isn't an expensive investment by any means. For investors, now could be an excellent time to buy and hold the healthcare stock for the long term.
