Both are serial acquirers in the healthcare space, but their acquisition targets are widely different, VHI is more of a software acquirer (similar to CSU) than the actual healthcare businesses. Although, as a group, VHI’s portfolio of businesses possess a higher gross margin with revenue sources that are highly recurring and stable. VHI is also trading at a premium valuation with a 23.4x Forward EV/EBITDA multiple, while WELL’s multiple is 11.1x. They are not apples-to-apples comparisons, but we think there is too much overlap between the two. Both also have different risk/reward profiles, a lot of optimism is already priced into VHI’s share price, while expectations are quite low for WELL. We are comfortable holding both names for the long term.
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