Teladoc currently trades at $6.81 per share and has shown little upside over the past six months, posting a small loss of 1.6%. The stock also fell short of the S&P 500’s 9.9% gain during that period.
Is there a buying opportunity in Teladoc, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Teladoc Not Exciting?
We're swiping left on Teladoc for now. Here are three reasons you should be careful with TDOC and a stock we'd rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Teladoc struggled to consistently increase demand as its $2.51 billion of sales for the trailing 12 months was close to its revenue three years ago. This wasn’t a great result and signals it’s a lower quality business.
2. Customer Spending Decreases, Engagement Falling?
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and Teladoc’s take rate, or "cut", on each order.
Teladoc’s ARPU fell over the last two years, averaging 9% annual declines. This raises questions about its ability to engage users and signals its platform’s value is eroding.
3. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Teladoc’s revenue to stall. This projection doesn't excite us and suggests its newer products and services will not accelerate its top-line performance yet.
Final Judgment
Teladoc isn’t a terrible business, but it doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 5.1× forward EV/EBITDA (or $6.81 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.
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