Structure, cash flow to rekindle investor confidence by TipRanks

© Reuters. Teladoc: Structure, cash flow to rekindle investor confidence

Teledoc (TDOC) is a provider of virtual health services in the United States.

I am bullish on the stock. (See Teladoc (NYSE 🙂 stock charts on TipRanks)

Underperformance

Teladoc stock lost more than a third of its value in 2021 for various reasons.

First, the company made significant acquisitions in 2020, including Livongo Health (NASDAQ 🙂 and InTouch Health. Acquisitions tend to affect an acquiring company’s balance sheet in the short term and then add value to it in the long term.

Second, Teladoc shares fell victim to a health tech sell-off in February and then again in May as investors decided to cash in some of their 2020 profits before it not be too late.

The Relative Strength Index suggests the asset has been close to oversold with a reading of 32.9, which is near its all-time low.

Growth

When companies acquire, they often improve their financing costs by adding more sustainability to their operating margins. Over the past 22 months, Teladoc has managed to reduce its weighted average cost of capital from 12.9% to 2.9%, which means investors can expect high cash flow in the future.

Investors are also probably making assumptions about the company’s prospects instead of looking at its tangible results. Teladoc’s CAPEX increased by 73.9% over the past year.

Analysts expect earnings per share to grow an additional 77.1% by December 2022. If we combine that with a price-to-book ratio trading at a sector haircut of 73.3%, we can reach a consensus according to which we are considering a Stock Undervaluation.

The Taking of Wall Street

Wall Street believes Teladoc is a moderate buy, with 13 buy ratings and eight sustaining ratings awarded in the past three months. The Teladoc average price target of $ 203.20 implies a potential upside of 67%.

Concluding thoughts

Teladoc’s share price fell due to acquisition spending, but the company has since improved its capital structure while producing tremendous growth in its free cash flow.

These factors combined could result in a significant increase in the fair value of the share.

Disclosure: At the time of publication, Steve Gray Booyens does not have a position in any of the titles mentioned in this article.

Disclaimer: The information in this article represents the views and opinions of the author only, and not the views or opinions of TipRanks or its affiliates, and should be considered in informational only. TipRanks makes no warranty as to the completeness, accuracy or reliability of this information. Nothing in this article should be construed as a recommendation or solicitation to buy or sell securities. Nothing in the article constitutes legal, professional, investment and / or financial advice and / or takes into account the specific needs and / or requirements of an individual, and nothing in the article constitutes an full or complete statement of the questions or topic is discussed therein. TipRanks and its affiliates are not responsible for the content of the article, and any action taken on the information contained in the article is at your own risk. Linking to this article does not constitute an endorsement or recommendation of TipRanks or its affiliates. Past performance is no guarantee of future results, prices or performance.

Disclaimer: Fusion media would like to remind you that the data contained in this site is not necessarily real time or accurate. All CFDs (stocks, indices, futures) and Forex prices are not provided by the exchanges but rather by market makers. Therefore, the prices may not be exact and may differ from the actual market price, which means that the prices are indicative and not suitable for trading purposes. Therefore, Fusion Media assumes no responsibility for any business losses that you may incur as a result of the use of such data.

Fusion media or anyone involved with Fusion Media will accept no responsibility for any loss or damage resulting from reliance on any information, including data, quotes, graphics and buy / sell signals contained in this website. Please be fully informed about the risks and costs associated with trading in the financial markets, it is one of the riskiest forms of investing possible.

About Myra R.

Myra R.

Check Also

Be patient, because GE Stock won’t get stuck at $ 100 per share forever

Just like in September and several months before that, until now in October, General Electric …

Leave a Reply

Your email address will not be published. Required fields are marked *