Should Investing in Hims & Hers Health's Shares Be Considered?
Introducing Hims & Hers Health, a groundbreaking company established in 2017, taking on age-old health concerns with a modern twist. Offering prescription meds, OTC solutions, and personal care items through their direct-to-consumer model, this telehealth company's journey went public via a SPAC merger in 2021. Overseeing dramatic transformations since, the stock has been a rollercoaster ride - volatile, downward-trending, and hitting record highs.
After the SPAC merger, Hims & Hers witnessed stock market fluctuations, eventually dipping to an all-time low in 2022. However, the stock has bounced back since, reaching an upsurge in 2024. The volatile price swings have been accompanied by soaring subscriber growth and rising revenue.
Hims & Hers' Financial Snapshot
In Q3 2024, Hims & Hers pulled in $401.6 million in revenue, resulting in free cash flow of $79.4 million, marking an impressive 77% and 311.4% growth in revenue and free cash flow, respectively. The company's financial strength is bolstered by a solid $254 million net cash balance sheet.
Risks to Consider
Stock-based compensation and the acquisition of other businesses using the company's stock pose challenges. Management has issued 976,341 shares of common stock to fund the acquisition of MedisourceRx. With outstanding shares currently up 15%, mature companies often work to return capital to shareholders through stock repurchases.
The Food and Drug Administration (FDA) also plays a significant role in Hims & Hers' operations. Recent FDA rulings, like the resolution of the tirzepatide weight loss drug shortage, could impact the company's product offerings.
Looking Ahead for Hims & Hers
With fourth-quarter 2024 revenue projected within a $465 million to $470 million range, impressive double-digit growth is anticipated. As the weight loss drug revolution unfolds, investors should anticipate a degree of uncertainty. However, Hims & Hers' adaptive approach promises to maintain users' individual clinical needs.
Investment Takeaways
At a trailing 12-month free cash flow PE ratio of 47, Hims & Hers shares seem moderately priced for value investors. However, growth-oriented investors might find the stock appealing due to the stock's recent market outperformance. Given the company's growth potential and innovative approach, investors should monitor financial performance and regulatory developments, as these factors can significantly impact Hims & Hers' value.
Following the impressive revenue and free cash flow growth in Q3 2024, Hims & Hers considered diversifying its finance strategy by using stock to fund acquisitions, such as MedisourceRx.
Given the company's rising revenue and upsurge in stock price, potential investors looking for growth opportunities might consider Hims & Hers as an attractive investment option.
