Q: On the last quarter conference call there was a review of the earnings and potential growth in earnings per share in the future. With the organic growth and potential margin improvement from cost cutting, earnout payments dropping in future years, spin out of Provider Solutions and the potential monetization of Circle/Wisp (assuming the money spent on debt reduction and share buybacks). I expect that the earnings should improve significantly in the next two or three years. All of this ignores any acquisitions. If all this happens I figure all is needed is some patience and we should see higher stock price 3 years out perhaps significantly agree?
5i Research Answer:
WELL has really transformed its story over the past few years from an unprofitable, high-growth name, to a name that is generating positive free cash flows, expanding its margin profile rapidly, and reducing its debt burden. Its growth rates are high, and while we may see its growth rates decelerate in the coming years, for a profitable name expecting to grow at double-digit rates, it trades at a reasonable valuation of 17X forward earnings. With rates coming down, we might expect WELL to pursue more acquisitions, and this should help to fuel its future growth.