Teledoc (TDOC), is a US-based virtual health service provider.

The stock is my favorite. See Teladoc stock charts at TipRanks.

Performance below expectations

Teladoc’s stock dropped more than three times its value by 2021, due to various reasons.

InTouch Health, Livongo Health, and InTouch Health are two examples of significant acquisitions the company made in 2020. The acquisitions have a tendency to impact the balance sheet of an acquirer company in the short term, but add value over time.

Teladoc’s stock also suffered from the health-tech market sell-off that took place in February, followed by another in May. Investors decided to cash-in on their 2020 profits as soon as possible.

With a relative strength index reading 32.9, the asset is close to being oversold. This level is very near its lowest point.

The Future of Growth

Acquisitions often result in lower financing costs for companies. This is due to increased sustainability of their operating margins. Teladoc’s weighted average capital cost has fallen from 12.9% down to 2.9% over the last 22 months. This means investors will see higher cash flows in the future.

Investors tend to make assumptions about the company’s prospects and not look at its actual results. Teladoc’s CAPEX has grown by 73.9% over the past year.

Analysts anticipate the earnings per share to grow by an additional 77.1% by December 2022. If we combine this with a price-to-book ratio trading at a 73.3% sector discount, we can draw a consensus that we’re looking at an undervalued stock.

Wall Street Take

Wall Street considers Teladoc a Moderate Buy. There are 13 Buy ratings and eight Hold ratings. Teladoc’s average price target is $203.20, which implies 67% upside potential.

Final Thoughts

Teladoc stock has seen a retracement in value due to acquisition spending. However, the company has been able to improve its capital structure and has experienced stellar growth in free cashflow.

Combining these factors can lead to significant upsides in stock fair value.

Disclosure: Steve Gray Booyens had no position in the securities listed in this article at the time it was published.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks does not warrant the accuracy, reliability or completeness of this information. The article does not constitute a solicitation or recommendation to buy or sell securities. The article does not provide legal, financial, investment, or professional advice. It also doesn’t take into consideration the individual needs or requirements. Neither is the information contained in it a complete or comprehensive statement about the subject or issues discussed. TipRanks or its affiliates are not responsible for the contents of this article. Any action you take based on the information is your responsibility. TipRanks and its affiliates do not endorse or recommend this link. The past performance of TipRanks or its affiliates is not an indication of future prices, results, or performances.