Telehealth company Teladoc, Inc. (TDOC - Free Report) has incurred significant losses in each reporting cycle since its inception.
As of Dec 31, 2016, the company had an accumulated deficit of $204.7 million. For the first half of 2017, net loss was $31.1 million, 3% higher year over year. These losses and accumulated deficit stemmed from substantial investments made by the company to acquire new clients, build its proprietary network of healthcare providers and develop its technology platform.
Accordingly, we anticipate that cost of revenues and operating expenses will increase substantially in the near future. These initiatives may prove to be more expensive than currently estimated by the company and may not succeed in increasing its revenues sufficiently to offset higher expenses.
For 2017, Teladoc is anticipated to report a loss of $1.52–$1.55 per share (down 12% year over year). The company’s prior losses, combined with its expected future losses, have had and will continue to have an adverse effect on its stockholders’ equity and working capital.
The company’s operations have consumed substantial amounts of cash since inception and it intends to continue making significant investments to support its business growth. In each of the past three years, the company used cash flow from operations. We believe the company has a long way to go before it starts generating positive cash flow from operations.
Also, the company’s debt has increased substantially in the past four years, leading to a spike in interest costs and consequently raising overall expense and eroding operating margin.
Over the past three months, the stock has lost 1.5%, compared with gains of 2.9% for the industry it belongs to. The stock has seen the Zacks Consensus Estimate for 2017 and 2018 loss being widened by 64% and 43%, respectively, over the last 30 days.
Teladoc’s valuation looks stretched at the current level. Looking at Teladoc’s price-to-book value ratio, which is one of the measures to value a company witnessing negative earnings, investors may not want to pay any further premium. The company currently has a trailing 12-month price-to-book ratio of 4.1, which is significantly above 1.9 for the industry and 3.6 for the S&P 500.
Teladoc’s trailing 12-month return on equity (ROE) undermines its growth potential. The company’s negative ROE of 13.1%, though moderated in the past two years, compares unfavorably with ROE of 23.7% for the industry and 15.9% for the S&P 500, reflecting its inefficiency in using shareholders’ funds.
Stocks to Consider
Aetna Inc. , one of the largest health benefits companies, beat estimates in each of the last four quarters with an average positive surprise of 19%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Anthem Inc. is a health care company, which provides medical products, through its subsidiaries. It surpassed estimates in three of the last four quarters with an average positive surprise of 8.6%. Currently, it carries a Zacks Rank #2.
WellCare Health Plans, Inc. provides managed care services targeted exclusively at government-sponsored healthcare programs. It beat estimates in each of the last four quarters with an average positive surprise of 47.4% and carries a Zacks Rank #2.
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Telehealth company Teladoc, Inc. (TDOC - Free Report) has incurred significant losses in each reporting cycle since its inception.
As of Dec 31, 2016, the company had an accumulated deficit of $204.7 million. For the first half of 2017, net loss was $31.1 million, 3% higher year over year. These losses and accumulated deficit stemmed from substantial investments made by the company to acquire new clients, build its proprietary network of healthcare providers and develop its technology platform.
Accordingly, we anticipate that cost of revenues and operating expenses will increase substantially in the near future. These initiatives may prove to be more expensive than currently estimated by the company and may not succeed in increasing its revenues sufficiently to offset higher expenses.
For 2017, Teladoc is anticipated to report a loss of $1.52–$1.55 per share (down 12% year over year). The company’s prior losses, combined with its expected future losses, have had and will continue to have an adverse effect on its stockholders’ equity and working capital.
The company’s operations have consumed substantial amounts of cash since inception and it intends to continue making significant investments to support its business growth. In each of the past three years, the company used cash flow from operations. We believe the company has a long way to go before it starts generating positive cash flow from operations.
Also, the company’s debt has increased substantially in the past four years, leading to a spike in interest costs and consequently raising overall expense and eroding operating margin.
Over the past three months, the stock has lost 1.5%, compared with gains of 2.9% for the industry it belongs to. The stock has seen the Zacks Consensus Estimate for 2017 and 2018 loss being widened by 64% and 43%, respectively, over the last 30 days.
Teladoc’s valuation looks stretched at the current level. Looking at Teladoc’s price-to-book value ratio, which is one of the measures to value a company witnessing negative earnings, investors may not want to pay any further premium. The company currently has a trailing 12-month price-to-book ratio of 4.1, which is significantly above 1.9 for the industry and 3.6 for the S&P 500.
Teladoc’s trailing 12-month return on equity (ROE) undermines its growth potential. The company’s negative ROE of 13.1%, though moderated in the past two years, compares unfavorably with ROE of 23.7% for the industry and 15.9% for the S&P 500, reflecting its inefficiency in using shareholders’ funds.
Stocks to Consider
Aetna Inc. , one of the largest health benefits companies, beat estimates in each of the last four quarters with an average positive surprise of 19%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Anthem Inc. is a health care company, which provides medical products, through its subsidiaries. It surpassed estimates in three of the last four quarters with an average positive surprise of 8.6%. Currently, it carries a Zacks Rank #2.
WellCare Health Plans, Inc. provides managed care services targeted exclusively at government-sponsored healthcare programs. It beat estimates in each of the last four quarters with an average positive surprise of 47.4% and carries a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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