The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Saul’s Investing Discussions


Subject:  Re: LVGO/TDOC Reports Date:  11/3/2020  2:06 AM
Author:  foodles Number:  73118 of 77969

It was pointed out last week after the TDOC/LVGO earnings that both companies beat and accelerated their revenue growth rates. Thought I would give a little more details on those trends these 2 (now merged) companies have shown.

Here are their revenues, sequential rev growth, and YOY rev growth, for the last 2 years.

LVGO Revs Seq Rev Growth YOY Rev Growth

1Q19 $32 51% 157%
2Q19 $41 28% 156%
3Q19 $47 14% 148%
4Q19 $50 8% 137%
1Q20 $69 37% 115%
2Q20 $90 30% 120%
3Q20 $106 18% 127%
4Q20 $115 8% 127% No guidance provided, same 8% seq growth as last year from Q3 -> Q4.

TDOC Revs Seq Rev Growth YOY Rev Growth

1Q18 $129 5% 43%
2Q18 $130 1% 37%
3Q18 $138 6% 24%
4Q18 $156 13% 27%
1Q19 $181 16% 40%
2Q19 $241 33% 85%
3Q19 $289 20% 109%
4Q19 $299 3% 92% Midpoint of guidance provided.
4Q19 $326 13% 109% Same 13% seq growth as last year from Q3 -> Q4.

The bolded fourth quarter numbers are either guidance or my estimates based on last years seq increase from Q3 to Q4.

I know when the merger was announced 3 months ago, some folks said this is no longer a hypergrowth opportunity. In case it's not obvious, I'd like to point out that both companies are hypergrowth, and accelerating. Yes, they've got Covid tailwinds, well so do ZM, PTON, DOCU, etc.

I also firmly believe that next quarter will also be triple digit growth for both companies (although since they're now merged, I'm not sure whether they'll split their metrics out separately as now). So LVGO and TDOC are the fastest growing companies discussed here outside of ZM (300+%) and PTON (200+% estimated this quarter, we'll see in a couple days, fingers crossed 🤞).

DDOG and CRWD are not in the top 3.

I realize that rev growth isn't the only metric to look at, and that there are other numbers that LVGO/TDOC don't stack up as well against say DDOG and CRWD, gross margin, for instance, although even those aren't that bad (LVGO is 76%, TDOC is 63%). But I remember someone (don't remember who, sorry) posted a study (or did one themselves) that showed that rev growth rate was the single most important factor in future stock price appreciation for high growth stocks.

So why did TDOC drop after the earnings release? (I don't know) And has continued to drop (that one's easier, because all the hypergrowth names have dropped). Also, I assume some LVGO holders that now have TDOC shares in their brokerage accounts and have sold it as they didn't want to hold it. That's OK with me, I've added more TDOC and happy to have it my largest position (followed by ZM, CRWD, and DDOG).

I believe the new TDOC company has a good chance of gaining 50% just from a P/S expansion perspective, as the combined entity now has a P/S of around 25 (while growing triple digits!), as Bert would say, well below it's cohort. After next quarter, the P/S drops to 21 (again, still with triple digit growth!). I don't expect it to have a P/S of 60, but it sure seems like 30-40 would be more reasonable for the growth they're showing.

And where's the continued growth coming from? New chronic conditions to treat, international expansion, cross selling between the 2 companies (which we've just started to see the benefits of), and how about the telehealth sector growth expansion itself into one of the largest markets around (healthcare).

I still think quite a few folks here held one or the other, and many probably will continue to hold the new company. I think that's a smart move, especially at the bargain price you can get it at currently.

Full disclosure, I'm long all companies mentioned above (LVGO/TDOC, ZM, CRWD, DDOG, PTON, among others), and very excited about their futures!
Copyright 1996-2021 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us