Teladoc Health (TDOC -2.40%) soared early in the pandemic as people favored online medical visits. But the recent past hasn't been so bright for the telemedicine giant. Teladoc continued to grow revenue -- in the double digits rather than the triple digits -- in the later stages of the pandemic, but the problem was the company didn't make much progress along the path to profitability. In fact, it even declared billions of dollars in non-cash goodwill impairment charges in 2022, setting it farther away from that goal.
But things have been looking up in recent times. Teladoc's suffering share price -- down more than 90% from its peak -- has even shown some signs of life. The stock has climbed 11% over the past three months. That may not seem like a lot considering past declines, but it still could be the start of positive momentum. Here are three reasons to join in on the optimism and buy Teladoc stock like there's no tomorrow.
Image source: Teladoc Health.
1. The potential of chronic care
Chronic care is driving revenue at Teladoc and represents a key growth area for the company moving forward. That's because many Americans suffer from chronic disease -- nearly half suffer from at least one. And this patient group likes the idea of going to one healthcare source for help with these conditions. We know this because more than one in three Teladoc chronic care members is signed up to multiple programs.
Teladoc has been selling more and more plans with access to various chronic care programs at a bundled price point. And that helped chronic care enrollment climb 13% in the most recent quarter.
Now I'll refer back to Teladoc's goodwill impairment charges, linked to its acquisition of chronic care specialist, Livongo. Yes, it's weighed heavily on Teladoc. But, over time, this investment may pay off as it reinforced an area that could lead to significant growth.
2. Teladoc's recovery plan
Teladoc last year launched a plan to balance its focus on revenue growth with a focus on reaching profitability. The company cut costs and improved efficiency, and these and other efforts are bearing fruit. Teladoc's results in the quarters last year met or beat expectations.
The company isn't delivering double-digit revenue growth as it did in the past, but, importantly, it's generating EBITDA and free cash flow growth. In the most recent quarter, Teladoc reported adjusted EBITDA of $89 million, surpassing the high end of its forecasts.
TDOC Free Cash Flow data by YCharts
And Teladoc predicts this trend of stronger EBITDA and free cash flow will continue over the next few years, thanks to its improved efficiency and the fact that it's exiting a high period of investment that went along with its Livongo purchase.
On top of this, Teladoc is launching a comprehensive review of its cost structure, to aim for further efficiencies and ensure all investments support the goal of whole person care.
All of these elements set Teladoc on a positive path toward profitability, making it an exciting investment opportunity today.
3. A dirt cheap valuation
Right now, Teladoc is trading for 1.2x sales, nearly its lowest ever by that measure. This looks incredibly cheap considering Teladoc's plan to favor profitability and its progress so far.
It also seems like a deal when we take a look at Teladoc's leadership in the market and recent customer wins. Teladoc serves more than half of Fortune 500 companies. And in the recent earnings report, Teladoc said it's seeing "significant competitive takeaways."
The company added almost four million lives to its programs in the quarter as customers ended deals with rivals and turned to Teladoc instead. This is as competitors fall short of customers' expectations or as these players struggle financially.
All of this means that, at today's price, Teladoc is dirt cheap -- making it a stock you'll want to buy like there's no tomorrow.
