As the eHealth market continues to soar, Maxim Manturov, Head of Investment Advice at Freedom Finance Europe, sheds light on this trend and three of the top undervalued eHealth stocks to watch.
The global eHealth market only continues to grow, driven by rising awareness throughout the pandemic of the benefits offered by digital solutions. From remote monitoring tools to telemedicine, eHealth has come into sharp focus for healthcare professionals across the globe.
In turn, retail investors looking to maximize their portfolios are jumping on this trend. As an increasing number of investors look towards eHealth as a means to both combat critical health issues and generate high returns, organisations are seeing demand for digital applications soar.
In light of this, let’s explore the growing popularity of the eHealth market and the trends associated with this growth. More importantly, let’s take a look at how investors can pick eHealth stocks that are right for them, as well as three undervalued eHealth stocks to watch.
The continued growth of the eHealth market
Analysts are expecting eHealth to grow at a compound annual growth rate of 16.1% during the forecast period of 2022 to 2027, with the expectation of the eHealth segment generating revenue of £46.7 billion in 2022 alone. China is expected to be the largest eHealth market in 2022 with £13.8 billion in revenue, followed by the US with £7.7 billion in revenue.
The major growth drivers of eHealth include the development of technology and the Internet of Things (IoT), as well as increasing demand for health management. In recent years, the number of Internet applications in healthcare have increased exponentially. Using the Internet, healthcare professionals can deliver medical information to consumers more efficiently.
In particular, technological advancements in electronic health records (EHR) are driving the adoption of eHealth solutions, thereby contributing to the growth of the overall market.
The impact of the pandemic on eHealth
The growth of the eHealth industry accelerated during the pandemic as various technologies were used for remote monitoring and health management, including technologies like artificial intelligence (AI) and big data. The pandemic also forced various governments to quickly shift patient care and records to eHealth, due to long lockdowns and the fear of further spreading of the virus. In turn, this led to a significant market growth.
This trend is expected to continue as awareness about the benefits of eHealth become more apparent. Even as the pandemic fizzles, digital health is expected to maintain its strength as healthcare providers and patients take advantage of new technologies and innovations.
Telemedicine remains one of the most important drivers of eHealth as it has increased access to healthcare, reduced person-to-person contact, and ensured continuity of care, as well as providing care for non-Covid emergencies.
How to pick the right eHealth stock for you
Investors can find the best eHealth stocks by following the standard parameters for selecting high-growth investments. Looking at revenue growth trends is a suitable place to start. It is typically a pretty good indicator that the company is doing something right. Even small, regular improvements over a long period can be a positive indicator. Both earnings growth and value must go hand in hand for the stock to be worth investing in.
You should also look at a company’s financial statements, which are often available on its investor relations website, both quarterly and annually. This will enable you to see whether revenue and / or profits are growing or declining. Companies that show positive profit growth tend to have financial and operational stability.
Ultimately, a stable eHealth company will possess certain characteristics: revenue growth, keeping debt at a low or medium level, competitiveness in its industry, and effective leadership.
Three stocks that are undervalued in the eHealth sector
1. Teladoc Health (TDOC) is arguably one of the brightest representatives of eHealth providers and received a solid boost from the pandemic. The company specializes in telemedicine services – providing medical care remotely over the Internet or phone, which was heavily needed during the pandemic.
The global telemedicine market is expected to grow at an average rate of 32.1%, reaching an expected £486.9 billion in 2028. With the industry’s steady growth, Teladoc Health seems poised to reap the benefits.
The bullish long-term outlook for Teladoc Health is supported by the fact that it is already a dominant player in the industry. As of January 2022, the company has a customer base of 76.5 million paying members in more than 12,000 companies. Despite Covid’s diminishing impact on the healthcare industry in 2021, Teladoc was able to increase its number of paid memberships by 50% year-on-year.
This is a clear sign of acceptance of the company’s virtual healthcare services. Teladoc Health is also growing through several strategic mergers and acquisitions. These deals boost earnings by helping to maintain engagement and expand the organisation’s geographical presence.
Between 2021 and 2025, Teladoc is targeting annual revenue growth of 25% to 30%. This will likely be supported by an increase in paid visits from members, combined with growth in average revenue per member.
2. American Well Corporation (AMWL) operates as a telemedicine company that provides digital health care. Its application offers emergency care, pediatric care, therapy, population health management, telepsychiatry, pregnancy and postnatal care, and breastfeeding support.
The company also provides telemedicine equipment, peripherals, TV sets, tablets, and kiosks. There is upside potential to the average target price of £5.97 (about 120% upside).
3. 1Life Healthcare, Inc. (ONEM) operates a membership-based primary care platform under the One Medical brand. The company has developed a digital health membership model based on direct consumer enrollment, as well as employer sponsorship.
Its membership model includes seamless access to digital health services combined with an invitation to in-office health care, which is typically covered by health insurance plans. The company also offers administrative and management services under contracts with physician-owned professional corporations or One Medical Entities. There is upside potential to the average target price of £18.37 (about 172% upside).