HIMS Stock is A Good Buy After Robust Q3 2024 Earnings

Hims & Hers Health, Inc. (NYSE: HIMS) is rapidly gaining traction as a notable player in the telehealth and wellness industry, with its stock performance attracting increased investor interest. This blog explores whether HIMS stock could be a good investment right now by examining the company's recent financials, growth potential, and valuation metrics. Additionally, we’ll assess some risks, helping you make an informed decision about adding HIMS to your portfolio.

1. About HIMS

Hims & Hers Health, Inc., based in San Francisco, operates a telehealth platform that connects consumers with licensed healthcare professionals, focusing on prescription and non-prescription health and wellness products. The company offers solutions for general wellness, skincare, mental health, sexual health, and hair care, largely catering to a younger, health-conscious demographic. Since its founding, Hims & Hers has expanded its reach, serving customers in the United States, the United Kingdom, and globally through its digital platform. Their direct-to-consumer approach has made healthcare more accessible, resonating well with today's digital-savvy population.

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2. HIMS Latest Financial Performance

Hims & Hers’ recent financial results reveal substantial growth, particularly in revenue and cash flow. In the quarter ending September 30, 2024, the company reported revenue of $401.56 million, marking a notable 77.13% year-over-year increase. Over the trailing twelve months (TTM), Hims & Hers achieved $1.24 billion in revenue, representing a 56.7% increase compared to the previous year. This growth illustrates the strong consumer demand for its telehealth services, which are now reaching a broader customer base.

The company also posted significant improvements in profitability. For the TTM, Hims & Hers recorded a net income of $101.26 million, a substantial turnaround from the net losses it reported in past years. Additionally, free cash flow reached $160.92 million over the TTM, a remarkable improvement that showcases efficient cash management and operational scaling. This increased profitability enhances Hims & Hers’ financial position, providing the capital needed for further investments and expansion.

3. HIMS Stock Price Performance and Valuation

HIMS stock has soared in 2024, showing a remarkable 220% increase over the past year, reflecting growing investor confidence. The stock is currently trading at around $20.76, up from approximately $8.90 at the start of the year. Despite this price appreciation, HIMS maintains a reasonable valuation compared to industry peers.

The stock’s trailing price-to-earnings (P/E) ratio is relatively high at 254.29, but the forward P/E is expected to decrease to 60.70, suggesting anticipated earnings growth in the coming years. HIMS also trades at a price-to-sales (P/S) ratio of 4.13, indicating that investors are willing to pay a premium for its revenue growth potential. The company’s valuation ratios align well with its growth trajectory, and its low debt levels and positive cash flow make it a financially sound option for growth-oriented investors.

4. Company Growth Potential

Hims & Hers Health is well-positioned for continued growth, thanks to both industry trends and strategic initiatives. The global telehealth market, projected to grow at a compound annual growth rate (CAGR) of over 17% from 2023 to 2030, provides a significant runway for HIMS. As consumers increasingly value convenience and accessibility in healthcare, HIMS’s online-first model aligns well with these preferences.

The company has also been proactive in expanding its product offerings. For instance, Hims & Hers recently announced plans to offer a generic version of a popular weight loss medication, tapping into the lucrative weight loss market. Additionally, HIMS’s recent inclusion in the S&P SmallCap 600 Index has heightened its visibility, attracting institutional investors and potentially increasing its stock demand over time.

5. Risks to Consider

While Hims & Hers Health has strong growth potential, there are risks associated with its business model and market positioning. Regulatory challenges in the telehealth industry are ongoing; HIMS relies on telemedicine legislation, which has seen adjustments following the COVID-19 pandemic. Changes in these regulations could impact its revenue streams. Additionally, competition in the telehealth market is fierce, with several players vying for market share, which could lead to pricing pressures.

Another notable risk lies in the high valuation metrics, particularly the P/E ratio. Investors need to be cautious, as high valuations often imply greater volatility. Nevertheless, HIMS’s revenue growth and product expansion strategy can mitigate some of these risks, making it still appealing for long-term investors.

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Conclusion

Hims & Hers Health, Inc. has shown impressive financial and stock price growth, supported by a strong business model and favorable market trends. With a strategic focus on accessible healthcare and plans to diversify its product portfolio, HIMS is well-positioned for continued success in the telehealth space. While regulatory and competitive risks exist, the company’s robust cash flow and prudent valuation make it a viable investment option for those seeking exposure to the rapidly expanding digital health industry.

For growth-oriented investors, HIMS stock presents an attractive opportunity to capitalize on the digital healthcare trend. Given its market potential and solid financial footing, HIMS is a stock worth considering for the long term.