WELL Health Technologies (TSE: WELL) announced today that it will be acquiring CloudMD’s (TSE: DOC) Cloud Practice business (medical software application) for a total of C$5.75 million. C$5.1 million is to be paid in cash when the transaction closes. The acquisition comprises three primary care clinics as well as Electronic Medical Record and ClinicAid billing software apps. These businesses are expected to be profitable and produce over C$9 million in annual revenues, implying a ~0.64x sales multiple for the purchase.
The deal will be accretive for WELL Health and is expected to be completed within this quarter. Amir Javidan, WELL’s COO, believes that this integration “can drive significant operating efficiencies for clinics” because it will give them access to WELL’s advanced apps.
Is WELL Health Stock a Buy, According to Analysts?
All analysts covering WELL Health are bullish on the stock, giving it a Strong Buy consensus rating based on seven Buys assigned in the past three months. The average WELL stock price target of C$8.75 implies 209.2% upside potential.
Insiders Have Been Selling Despite Positive Developments
WELL Health’s recent developments have all been positive. For example, last quarter, it reported record revenue and adjusted EBITDA and raised its Q3 guidance. Also, analysts are highly bullish on the stock. Nonetheless, there hasn’t been any insider buying. Instead, there have been small amounts of insider selling, giving the stock a negative insider confidence signal. Particularly, Director John Kim sold C$306,000 worth of shares in the past two weeks, and these were “informative” transactions, meaning that Kim has specific insider knowledge about WELL.
Conclusion: A Solid Acquisition
About five months ago, WELL raised C$34 million via an equity raise, and the company said that it intends to use that cash for accretive acquisitions. So far, WELL is doing that, with this CloudMD deal coming not long after its accretive INLIV acquisition. Paying a ~0.64x sales multiple for a medical software business seems like an excellent deal for the company, especially since it is expected to be profitable. Going forward, look for WELL Health to continue putting its cash to work, as depressed valuations present potential opportunities.
