WELL Health Technologies (TSX:WELL) is a digital healthcare company focusing on developing technology and services that could aid healthcare professionals in delivering positive patient outcomes. The company has witnessed healthy buying this year, with its stock price rising by 84.4%. Its solid quarterly performances and continued acquisitions have boosted its financials.

Let's assess whether WELL Health offers buying opportunities at these levels by looking at its third-quarter earnings and growth prospects.

WELL Health's third-quarter performance

Last month, WELL Health reported an impressive third-quarter performance, with its top line growing by 27% to $251.7 million. Organic growth of 23% and acquisitions over the last four quarters drove its sales, while the divestments offset some of the growth. It had around 1.48 million patient visits and 2.24 patient interactions during the quarter, representing a year-over-year growth of 41% across both metrics. Amid the topline growth, its gross profits grew by 19%. However, its adjusted gross margin contracted by 150 basis points to 44.6% amid increased contributions from lower-margin recruiting revenue from the acquisition of CarePlus.

The digital healthcare company's adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew 16% to $32.7 million. However, the adjusted EBITDA to WELL's shareholders rose by 10% to $25.1 million. Its adjusted net income stood at $13 million, slightly improving from $12.9 million in the previous year's quarter. The company generated $16.2 million of adjusted free cash flow during the quarter, supported by its comprehensive cost-cutting program, which it implemented earlier this year. Now, let's look at its growth prospects.

WELL Health's growth prospects

Given their accessibility, cost-effectiveness, and convenience, more people are adopting digital healthcare services. Technological advancements and improving internet penetration have also contributed to the rising popularity of virtual services, thus expanding the addressable market for WELL Health.

Meanwhile, the company continues to invest in advancing AI (artificial intelligence)-powered tech enablement for care providers, which could strengthen its position in the digital healthcare sector. The company's acquisition pipeline looks solid, with 17 signed LOIs (letters of intent) and definitive agreements. Also, the company's cost-cutting program would continue to improve its profitability.

Moreover, WELL Health has rebranded its subsidiary WELL Provider Solutions Group as WELLSTAR Technologies. This pure-play software-as-a-service (SaaS) technology company offers high-quality technology and services to around 37,000 healthcare providers to improve patient care. The company is also working on spinning out WELLSTAR, thus providing investors with an attractive investment opportunity in healthcare technology SaaS. It expects to complete the spinoff by the end of next year.

WELLSTAR recently acquired two healthcare-focused technology companies, which could contribute $15 million in annualized revenue, thus raising its 2025 pro forma revenue to $70 million. Also, its gross margins could remain above 80% while its EBITDA margin would be around 20%. Considering all these factors, I believe WELL Health's growth prospects look healthy.

Investors' takeaway

Despite the substantial increase in its stock price, WELL Health's valuation looks attractive. Its next-12-month price-to-sales and NTM price-to-earnings multiples stand at 1.6 and 24.2, respectively. Given its solid growth prospects, improving profitability, and attractive valuation, I expect WELL Health to deliver superior returns over the next three years.