How to Invest in Waystar Technologies

If you follow the healthcare sector and you're familiar with the complexities of medical payments, you may be wondering how to invest in Waystar Technologies. Waystar Technologies is a software-as-a-service (SaaS)-based company that allows healthcare providers to manage payments using a single cloud-based platform. Established in 2017 with the merger of revenue cycle technology providers Navicure and Zirmed, the company says it facilitated 4 billion healthcare transactions in 2022, amounting to $900 billion in annual gross claims.

Waystar Technologies is a revenue cycle management software. Revenue cycle management, or RCM, essentially includes all of the processes healthcare providers use to get paid in a timely manner. Its many steps include confirming a patient's insurance eligibility at the time they schedule an appointment, assigning proper medical codes, billing insurance companies, collecting payments, and managing claim denials.

The labyrinth of steps is a time suck for providers and leaves lots of room for errors. Waystar says its internally developed artificial intelligence (AI) and proprietary algorithms allow doctors and medical facilities to automate many of their processes while improving efficiency and accuracy.

Waystar Technologies isn't a publicly traded company yet, having recently pushed back its IPO plans. Keep reading to learn more about investing in Waystar Technologies, including the latest on its IPO and whether the company should be part of your portfolio if it becomes a publicly traded company.

Is it publicly traded?

Is Waystar Technologies publicly traded?

Waystar Technologies isn't yet publicly traded on the stock market. However, it confidentially filed for an initial public offering (IPO) in August 2023 and made its filing public two months later, according to Reuters. Since then, the Louisville, Kentucky-based company has pushed back its IPO plans until 2024 due to stock market volatility.

When will it IPO?

When will Waystar Technologies IPO?

As of December 2023, Waystar Technologies hadn't announced a date for its IPO. Although the company was poised to begin its IPO roadshow in early November, it put those plans on hold amid a shaky IPO market. As of this writing, Waystar's stock market debut seems likely to appear on the IPO calendar in 2024.

When the company filed to go public in August, it was reportedly eyeing an $8 billion valuation, including debt. Waystar said in its S-1 filing that it intended to list its common stock on the Nasdaq exchange under the ticker "WAY." It hasn't announced the number of shares on offer or its IPO price.

How to invest

How to buy Waystar Technologies stock

Swedish investment firm EQT Partners and the Canadian Pension Plan are the majority owners of Waystar Technologies. Bain Capital retains a minority stake.

Until Waystar Technologies stock becomes publicly traded, it will be off-limits to most investors. To invest in Waystar Technologies or any other pre-IPO stock, you'd need to be an accredited investor, a status that's limited to people with a high net worth or income or those who hold a financial license. If you're an accredited investor, you could use a platform like Equity Bee or Forge Global to see if pre-IPO shares are available.

Assuming the company proceeds with plans to go public, it may still be tough to get in on the IPO. Investing in IPO stocks can be difficult for retail investors. Brokerages are usually allotted a limited number of shares, so they often reserve them for institutional investors and wealthy clients. However, once shares begin trading on stock exchanges, buying them will be simple if you follow these four steps.

1. Open a brokerage account: Once you choose the financial institution where you want to open an account, you'll need to provide a few pieces of information, like your name, address, date of birth, and Social Security number. You'll also need to choose the type of account to open. If your goal is to build a nest egg, you could opt for an individual retirement account (IRA). But if you want to access your funds before retirement without penalty, you could open a taxable brokerage account.
2. Figure out your budget. Once you've opened your brokerage account, you'll need to decide how much you want to invest. Diversification is essential when you're investing in stocks because you need to spread out your risk. So whether you're investing in Waystar Technologies or another company, any individual stock should only make up a small fraction of your overall investment budget.
3. Do your research. Before you invest in any company, you should be familiar with its business model, how it makes money, its competitive advantage, and its risk. A company that's been publicly traded for a long time will have extensive information available, including earnings call transcripts and annual reports. An IPO company like Waystar Technologies has less publicly available information, but you can still learn the basics by reviewing its S-1, a form companies are required to file with the U.S. Securities and Exchange Commission before their IPO.
4. Place an order. Once you've funded your account and decided what stocks you want to buy, you can place an order by entering the stock's ticker and the number of shares you want. You'll need to choose between a market order vs. a limit order. With a market order, you're telling your broker to buy the number of shares you specified immediately at market price. With a limit order, you tell your broker to execute the trade only at a specified price.

Although Waystar Technologies shares aren't available to most investors at this point, here are some alternative opportunities to consider.

Alternative investing ideas

HCA Healthcare

One reason you might be bullish on Waystar Technologies is simply that healthcare is something we all need at some point and will continue to be a gargantuan area of spending, particularly with an aging population. Healthcare spending accounted for almost one-fifth of U.S. gross domestic product in 2021 and is projected to grow by 5% annually through 2030.

Investing in HCA Healthcare (HCA -2.37%), which is the largest for-profit hospital system in the U.S., operating 187 hospitals with 50,000 beds, could help you capitalize on the growth in health spending.

Oracle

Software giant Oracle (ORCL 2.02%) may not come to mind when you think of healthcare technology. But in 2022, Oracle completed the acquisition of health IT company Cerner for $28 billion -- the largest acquisition in the company's history. Healthcare data company Definitive Healthcare reports that Oracle Cerner now has a market share of 27.8% for RCM software and ranks No. 2 for hospital installations.

Alphabet

Google parent company Alphabet (GOOGL 10.22%) (GOOG 9.96%) is a top AI stock, but it's not commonly associated with health services. But like Waystar Technologies, the search engine behemoth is using AI to improve healthcare.

For example, Google Health recently introduced new Vertex AI Search features that use AI to help providers quickly extract the information they need from patients' medical records. Google is also reportedly testing its Med-PaLM 2, a medical chatbot technology, at the Mayo Clinic.

Profitability

Is Waystar Technologies profitable?

Waystar Technologies is not yet profitable, according to its S-1 filing -- which isn't especially unusual for SaaS companies. The company reported a $44 million loss in 2022, about 6% lower than its $47.1 million net loss in 2021. However, Waystar grew its revenue by 22%, from $578.6 million in 2021 to $704.9 million in 2022.

The company also reported a net revenue retention rate of 109.7% for the 12-month period that ended June 30, 2023. Net revenue retention shows the rate at which existing customers are increasing their spending and tends to be an important metric for SaaS businesses because it indicates whether the company has the ability to retain and upsell existing customers vs. whether it needs to attract new customers for growth. Waystar's 109.7% net retention rate shows that its customers upped their spending by 9.7% in the 12 months leading up to June 2023.

Should I invest?

Should I invest in Waystar Technologies?

It's not possible to invest in Waystar Technologies yet for most investors since the company isn't publicly traded. But if the company moves forward with its IPO in 2024, you might want to consider investing if:

• You understand Waystar's products and believe they have the potential to simplify healthcare payment processing.
• You already have a well-diversified investment portfolio and are looking for additional healthcare technology exposure.
• You can afford to lose money, particularly in the short term.
• You're comfortable investing in a company that's not yet profitable.
• You plan to hold the stock for at least three to five years and believe it can outperform the S&P 500 index in the long term.

On the other hand, here are some reasons you may want to avoid Waystar Technologies:

• You're seeking dividend income since dividend payments are rare when you invest in SaaS companies and IPO stocks.
• You want to earn a quick profit and don't plan to make the stock a long-term holding.
• You don't understand how the company makes money.
• You don't believe that the company has a wide economic moat.

Related investing topics

ETFs

ETFs with exposure to Waystar Technologies

Because Waystar Technologies isn't publicly traded, there are no exchange-traded funds, or ETFs, that offer direct exposure to the stock. The following ETFs could help you capitalize on similar investment themes, though:

Health Care Select Sector SPDR Fund (XLV)

The Health Care Select Sector SPDR Fund (XLV 0.03%) provides broad exposure to the healthcare stocks represented in the S&P 500. Its 64 holdings include companies in pharmaceuticals, biotechnology, healthcare providers and hospitals, and healthcare technology. The ETF could be a smart bet if you believe the healthcare sector can grow at a faster pace than the overall economy. The fund has a low expense ratio of 0.10%, meaning that only $1 of a $1,000 investment goes toward fees.

Invesco S&P SmallCap Health Care ETF

If you want to invest in healthcare but you're willing to take on more risk, the Invesco S&P SmallCap Health Care ETF (NYSEMKT:PSCH) is an option. The fund invests in the healthcare stocks in the S&P SmallCap 600, which is made up of U.S. stocks with a market cap between $850 million and $5.2 billion. The ETF has 68 holdings and an expense ratio of 0.29%.

Global X Funds Global X Robotics & Artificial Intelligence ETF (BOTZ)

The Global Funds Global X Robotics & Artificial Intelligence ETF (NYSEMKT:BOTZ) is an option for investors who want to invest in the growing use of robotics and AI. The fund tracks the 44 companies in the Indxx Global Robotics & Artificial Intelligence Thematic Index. As is common for specialized ETFs, the fund's expense ratio is relatively high at 0.69%.

The bottom line on Waystar Technologies

Healthcare in the U.S. is extraordinarily complex. If you believe Waystar Technologies has the potential to simplify revenue cycle management and the healthcare payment process in general, perhaps the stock deserves a look if the company goes public.

But keep in mind that investing in healthcare technology is risky, as is investing in IPO stocks. Aim to build a diversified portfolio of index funds before you layer on a risky investment. Finally, limit your investment in any individual stock, be it Waystar Technologies or any other company, to no more than 5% of your portfolio.