The stock of Teladoc Health (NYSE:TDOC, 30-year Financials) gives every indication of being modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $181.99 per share and the market cap of $27.8 billion, Teladoc Health stock is estimated to be modestly overvalued. GF Value for Teladoc Health is shown in the chart below.

Because Teladoc Health is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 42.1% over the past three years and is estimated to grow 46.60% annually over the next three to five years

It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Teladoc Health has a cash-to-debt ratio of 0.53, which is in the middle range of the companies in the industry of Healthcare Providers & Services. The overall financial strength of Teladoc Health is 5 out of 10, which indicates that the financial strength of Teladoc Health is fair. This is the debt and cash of Teladoc Health over the past years:

It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Teladoc Health has been profitable 0 over the past 10 years. Over the past twelve months, the company had a revenue of $1.1 billion and loss of $4.24 a share. Its operating margin is -38.23%, which ranks worse than 83% of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of Teladoc Health is ranked 3 out of 10, which indicates poor profitability. This is the revenue and net income of Teladoc Health over the past years:

Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Teladoc Health's 3-year average revenue growth rate is better than 94% of the companies in the industry of Healthcare Providers & Services%. Teladoc Health's 3-year average EBITDA growth rate is -56.1%, which ranks in the bottom 10% of the companies in the industry of Healthcare Providers & Services.

Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Teladoc Health's return on invested capital is -7.84, and its cost of capital is 3.49. The historical ROIC vs WACC comparison of Teladoc Health is shown below:

In conclusion, the stock of Teladoc Health (NYSE:TDOC, 30-year Financials)shows every sign of being modestly overvalued. The company's financial condition is fair and its profitability is poor. Its growth ranks in the bottom 10% of the companies in the industry of Healthcare Providers & Services. To learn more about Teladoc Health stock, you can check out its 30-year Financials here. To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener.



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