Building a profitable stock portfolio doesn't happen overnight, and no investment is perfect or guaranteed. However, businesses with solid growth trajectories and wide moats in steadily evolving industries can find footing in many market environments and help enrich investors in the process.
If you're looking for great companies to put cash into right now as you build out your ideal basket of stocks, here are two names you may want to consider.
1. Teladoc
Teladoc (TDOC -2.40%) may not be giving the lightning returns investors became accustomed to during the height of the pandemic, and the stock has been one of many afflicted by volatile sentiment over the last several quarters. Still, as one of the premier names in the global telehealth industry with a platform that targets the broad spectrum of consumer healthcare needs, the demand for its services remains high.
Teladoc makes most of its money from fees paid by large entities like insurers, employers, and healthcare organizations, but patients can also pay one-time fees to access a variety of virtual care services. For the nine months that ended Sept. 30, the company's platform facilitated a whopping 14 million visits. Teladoc ended the period with about 90 million members in its U.S. integrated care segment and 1.1 million enrollees in its chronic care management wing alone.
In the first nine months of the year, Teladoc hit just shy of $2 billion in revenue, a 10% increase from the same period in 2022. This was driven by a 7% increase in revenue from its Integrated Care segment, as well as the continued growth of its mental healthcare segment BetterHelp, which alone saw revenue soar 15%.
Teladoc still isn't profitable on a generally accepted accounting principles (GAAP) basis, but steady progress is there. Instead of the nearly $10 billion net loss it reported in the first three quarters of 2022, Teladoc's net loss for that period this year was around $192 million, with most of red ink derived from non-cash losses such as stock-based compensation.
The company remains cash-flow positive and is also seeing considerable profits on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis. The company generated $100 million in free cash flow in the nine months ending Sept. 30, and adjusted EBITDA rose 40% year over year to $214 million.
Teladoc investors, myself included among them, may still have a long road ahead. But the best could still be yet to come for this top healthcare stock as telehealth evolves in the years ahead. That may induce some investors to take a second look at buying shares.
2. Chewy
Chewy (CHWY 2.99%) is more than an online pet store, but its flagship e-commerce platform is raking in revenue, cash, and profits at a steady pace as pet spending remains in play in a tough macro environment. While pet spending can fluctuate in periods where consumer spending levels decline, these expenditures are generally seen as more essential and can retain a certain measure of resistance to these broader macro trends.
In the most recent quarter, Chewy's net sales totaled $2.8 billion, up 14% from one year ago. The company also generated a net income of $19 million. That figure was a slight decrease from one year ago.
On an adjusted EBITDA basis, though, the company was profitable to the tune of about $87 million in the quarter, a 5% jump from one year ago. Free cash flow for the quarter totaled $101 million.
It's important to point out that not only are customers increasingly spending more on Chewy, but they are spending more through recurring forms of revenue like the company's auto-ship program, which allows users to set up ongoing shipments of their favorite products. Net sales per active customer rose 15% year over year in the second quarter of 2023 to $530, while auto-ship sales accounted for a whopping 76% of Chewy's second-quarter revenue.
In other words, Chewy is making most of its revenue from ongoing sales from repeat customers rather than one-time purchases. The company continues to find ways to streamline costs, with one of the most prominent being the continued buildout of its network of automated fulfillment centers. Chewy is planning on opening a fifth automated fulfillment center early next year.
The company is also in the process of launching into its first international arena, Canada, a market where pet spending hit 9 billion Canadian dollars in 2019. Chewy's business isn't just about selling pet food. It offers thousands of products on its platform, its own line of pet supplements, an online pharmacy, pet health insurance plans, and a pet telehealth service. In fact, 85% of its sales in the second quarter of 2023 were from nondiscretionary consumables and healthcare purchases made by animal owners. This business looks like a solid play for investors wanting to get in on the future growth of the lucrative pet industry.
