Out of curiosity, I prefer to test in on the highest buys over at AJ Bell and Hargreaves Lansdown. Usually their lists are made up of the standard UK inventory suspects like Rolls-Royce, or Large Tech names corresponding to Nvidia, Tesla, and Palantir.

Nevertheless, you do get the odd exception. One which stood out not too long ago was Hims & Hers Well being (NYSE: HIMS). On 24 February, this was the sixth most-bought share amongst AJ Bell clients.

Now, I really feel for a few of these invested as a result of Hims and Hers inventory plummeted 26% yesterday (25 February)! But regardless of this drop, it’s nonetheless up 270% up to now yr.

Right here, I wish to dig into this this under-the-radar US inventory to see if it’s value me shopping for.

Digital healthcare

Hims and Hers is a web based healthcare firm. It provides prescription medicines, over-the-counter wellness merchandise, and digital consultations for circumstances corresponding to hair loss, psychological well being, and skincare.

Nevertheless, it has been compounded semaglutide merchandise which have put rocket boosters below the share price. Semaglutide’s the energetic ingredient in Novo Nordisk’s blockbuster GLP-1 medicines Ozempic and Wegovy. Compounded medicine are custom-made alternate options to branded variations.

In Could, the corporate was allowed to start out prescribing these copycat weight-loss merchandise as a result of there was a GLP-1 drug scarcity attributable to huge demand. It’s been providing compounded variations of semaglutide at costs beginning round $165 a month. In contrast, the checklist costs for Ozempic and Wegovy with out insurance coverage are approach increased. 

Unsurprisingly, this has pushed enormous development on the digital well being agency. Nevertheless, regulators introduced final week that the scarcity in semaglutide injection merchandise is over. Because of this, compounding pharmacies like Hims and Hers must cease promoting them within the subsequent few weeks.

Nonetheless sturdy development

On 24 February, the corporate posted its This autumn outcomes. Income surged 95% yr on yr to $481m, whereas earnings per share skyrocketed to 11 cents from 1 cent. Nevertheless, gross margin fell from 83% to 77% as a result of increased prices and GLP-1 merchandise that have been “strategically priced to draw new clients“.

Co-founder and CEO Andrew Dudum stated: “We continue to build a platform that leverages personalisation and technology unlike any traditional healthcare system. Over 2 million subscribers now entrust Hims & Hers to aid them in their journey to better health.”

The underlying platform’s rising properly. Excluding GLP-1 medicine, full-year income elevated 43% to over $1.2bn. This noticed the agency attain its earlier 2025 income goal a yr early!

In the meantime, the corporate’s pursuing vertical integration. To this finish, it not too long ago acquired a peptide facility in California and blood-testing enterprise Trybe Labs. This latter acquisition permits it to supply at-home blood testing providers, offering clients with insights into numerous well being markers.

Price watching

For 2025, administration expects income of $2.3bn-$2.4bn (roughly 60% year-on-year development) and adjusted EBITDA of $270m-$320m. That places the inventory on an inexpensive price-to-sales (P/S) a number of of about 3.5.

However, the priority right here is that earnings development will drop sharply as soon as compounded semaglutide merchandise disappear. There’s additionally a whole lot of competitors within the digital healthcare area.

I believe it could be too dangerous to attempt to catch this falling knife proper now. However it is a very attention-grabbing $8bn development firm. So I’ve put the inventory on my watchlist.