Back from the edge
Canadians and indeed the world are finally starting to see signs of recovery from the pandemic. With vaccinations well underway, many are wondering what a post-pandemic world will look like. Many new industries were introduced during the pandemic. Some investors fear that these industries will be all but abandoned in the years to come.
But, at least in one case, that’s just not true. The healthcare industry received a lot of investment during this time. This will most likely be the case in the future. It is very clear now that the world was not prepared for this disaster, and it cannot happen again. Investment in health care is virtually guaranteed.
Beyond this larger theme, I would then focus on one aspect of healthcare that has experienced immense growth, namely virtual healthcare. With everyone at home, there had to be a safe way to see a doctor. Virtual healthcare has offered this and more. Patients were seen faster, more often, and benefited from a cheaper option for office visits. Most places in Canada are highly unlikely to simply revert to office visits when a physician shortage has harmed Canadians for years.
Virtual healthcare is likely to start receiving major investments, especially as industries consolidate. When this happens, a TSX stock that you want in your portfolio is Cloud® Software and Services (TSXV: DOC).
The future of health
The CloudMD action may be young, but it has achieved a lot in a short period of time. Let’s start with growth. The company entered the scene in 2018 with a market cap of just $ 33.2 million. Fast forward just three years, and today the company has increased that market cap to $ 374.1 million!
Much of this comes from growth through acquisition. Of course, the company also got into debt during this time, but the revenues are already paying off. And that’s really not much. As of today, the company is only $ 7 million in debt, with revenue increasing 187% year-over-year in the last earnings report.
The company made five acquisitions during the first quarter, adding $ 13 million in annual revenue. And between the first quarter and the report, it closed two more and said two more would close in June. This would bring in $ 79 million in additional annual revenue.
Still, the company’s current revenue of $ 120 million doesn’t even take into account expected organic growth or synergies. In addition, it has a strong cash position of $ 95 million on hand and $ 35 million remaining after the last two acquisitions. It is thus able to benefit from new debt financing options, make new acquisitions and be profitable by the second half of 2021.
What’s the catch?
Part of the reason I think CloudMD stock will continue to climb 1000% over the next decade is simple: It’s cheap. TSX shares are trading at a measly $ 1.85 at the time of writing. So you could have a small stake in that TSX stock, and a 1000% growth would raise it to $ 18.50 per share. This could turn a $ 5,000 investment into $ 50,000!
But because TSX stock is so cheap, even if this growth in the share price does happen – and I think it will – there will likely be some volatility along the way. Just look at last year. Shares have exploded by 1180% between its IPO in 2018 and October 2020. Since then, stocks have fallen with the tech retreat of 42%.
But I think that leaves a great opportunity for investors to get started on the cheap. With CloudMD stocks trading at 2.9 times book value, this is just one TSX stock that won’t stay down for long.