Teladoc (NYSE: TDOC) has long had poor investor sentiment. Telemedicine specialty stock is 95% below its 2021 high. In the early days of the COVID-19 pandemic, Teladoc's at-home virtual care business grew rapidly. Teladoc, like other "stay-at-home" firms, has struggled since normalcy. The company is unprofitable, and investors have mainly given up on virtual care.
At the start of April, Teladoc's CEO abruptly quit, shocking investors and giving no reason. CFO Mala Murthy is acting CEO while the company finds a new CEO. Mr. Murthy continues CFO.
The company's earnings have never met Wall Street's expectations. Teladoc has failed to make a profit despite promising business and widespread virtual medical care technology adoption. In 2022, the business impaired nearly $13 billion in non-cash goodwill due to declining virtual care demand and ongoing losses from Livongo Health.
In 2023, Teladoc lost $220 million, or $1.34 per share. The stock was lukewarm despite this big improvement over 2022's impairment-impacted earnings.
Teledoc trades at less than 1 times sales and generates free cash flow. Teladoc's revenue estimates have reduced due to losses, but there's good news. Teladoc generates free cash flow, unlike many former tech stocks. Its free cash flow exceeded $190 million in 2023. The price-to-free-cash-flow ratio is 12. The corporation reports accounting losses due to stock-based compensation, not operating cash deficits. Teladoc announced $201 million in non-cash stock-based compensation in 2023.
Teladoc has a price-to-sales (P/S) ratio of 0.92, which may appeal to fundamental investors. Competitor Doximity has a P/S ratio around 12. Its price-to-free-cash-flow ratio is 29, which is high. Teladoc's stock is undervalued compared to Doximity's profit.
Teladoc may be worth It After three years of terrible news, Teladoc has done a terrific job "taking a big bath" by releasing a lot of it quickly. Teladoc stock has an extremely inexpensive P/S ratio of less than 1, but investors shouldn't expect the same net earnings growth or prices as in 2021. In addition, the company consistently generates positive free cash flow.
Despite modest sales growth, management is improving outcomes. Its cost-saving efficiency initiative might increase gross margin by 1% in three years. By 2025, executives estimate EBITDA to rise by approximately $100 million. Although slow, the company appears to have bottomed out.
Teladoc deserves careful consideration given its rapid drop from its peak and 52% distance from its 52-week high. Look no further for patient investors seeking a turnaround story with positive free cash flow and significant value relative to direct competition.
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