This under-the-radar healthcare stock could be on sale for the last time
The stock market is a short-term popularity contest, and if you look at most of the health care stocks in 2021, you might notice that telehealth hasn’t been very popular. In addition, the telehealth company Health for him and for her (NYSE: HIM) went public through a Special Purpose Acquisition Company (SPAC) merger, another unpopular investment theme this year, and we have a stock market close to the lows.
But where others see declining action, I see an opportunity. Am i crazy Let’s jump in the fray and explore why Hims & Hers Health might be about to take off.
Focus on the consumer experience
Hims & Hers started at the end of 2017; it offers telehealth consultations for as little as $ 39 (you don’t need insurance) and then sells prescriptions that are mailed to your door. It covers health issues such as hair loss, dermatology, sexual health, mental health, and women’s health.
Image source: Getty Images
So it’s natural to ask, “Well, isn’t that what a traditional doctor does?” Yes, but consider this: A study from the Cleveland Clinic, one of the nation’s largest hospitals, found that men don’t have good relationships with healthcare providers. He found that 72% would rather do household chores than see a doctor, and 20% are not honest with their doctor. The main reason for dishonesty? Almost half were embarrassed.
For men, health issues such as hair loss or erectile dysfunction can be very intimidating to discuss with someone face to face. Meanwhile, women face their own barriers, including unique health issues, and are statistically more likely to face financial barriers to receiving care. Hims & Hers offers a more user-friendly “gateway” to the healthcare system.
The company’s branding and user interface makes it look like you’re buying cool products rather than getting drugs from a doctor. It’s about trying to transform healthcare from something you seek out when you have a problem into a brand that patients love to interact with. Hims & Hers has a Net Sponsor Score of 65 out of 100, indicating that patients are likely to refer the brand to family and friends.
Company performance is buzzing
Three quarters of being a public company, the company seems to be doing well. Hims & Hers topped analyst revenue estimates for all three quarters and increased its full revenue forecast for 2021 from $ 195 million to $ 205 million at the end of 2020 to $ 251 million to $ 255 million in the second quarter from 2021, a 24% increase in forecasts, all in one year.
Hims & Hers is not yet profitable, but its finances appear solid. The company has gross margins of 78%; it posted an operating loss of just $ 17 million in the second quarter of 2021 compared to its cash and short-term investments totaling $ 317 million. In other words, investors shouldn’t have to worry about the dilution of having to raise tons of capital.
More than a pandemic stock
Healthcare is one of the largest industries in the world, worth billions of dollars in the United States alone. As of the end of 2017, the company has built its customer base to 453,000 subscribed customers from scratch in just a few years. Its subscriber count in the second quarter of 2021 represents a 75% year-over-year increase.
The market appears to be skeptical of telehealth stocks as more people get vaccinated, but Hims & Hers is proving its ability to retain customers. CEO Andrew Dudum noted on the company’s second quarter 2021 conference call that it has retained 88% of its oldest subscriber cohort. In other words, the vast majority of its customers that it acquired two years before the pandemic (the company was launched in late 2017) are still paying customers today.
Its ability to retain customers, combined with the increased traffic COVID has been to telehealth companies, could imply not a temporary shock for Hims & Hers, but a permanent shock. Investors will, of course, have to watch the next few quarters to track how it is retaining its users, but the ever-growing advice from management could be a sign of confidence in the way things are going.
Hims & Hers has signaled its intention to expand outside of the United States. This summer, she acquired Apostrophe, a UK dermatological healthcare company, for undisclosed conditions. Thanks to Apostrophe, she now offers skin care services in England, Scotland, Northern Ireland and Wales; opening the door to Hims & Hers in Europe.
By combining new categories of care with new geographic markets, the company has fertile ground for strong growth in the future; it is up to management to continue to perform as they have done so far.
The stock is very cheap
Hims & Hers is proven to be one of the cheapest stocks on the market today. It trades at a small market capitalization of just $ 1.4 billion. Using management’s revenue forecast of $ 255 million, this equates to a price / sale ratio from 5.9.
For a company with revenue increasing by 71% (compared to 2020 if it meets management’s forecast) and generating gross margins of 78%, you would think this is a tech stock. which deserves a high valuation. No, it’s just a healthcare company that sells services and products and does a great job.
Investors should remember that this is a young company and healthcare is a competitive field, so it is essential that the company continues to perform well and build that history of success. Hims & Hers is a “buy and watch” stock; don’t define it and forget it.
In conclusion, I find it difficult to justify the dramatic drop in stocks, as the underlying company is doing better than ever. Profit season is approaching and we’ll see if Hims & Hers can get it out of the park again.
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