This Monster Growth Stock Is Up 167% in the Past Year and Disrupting the Healthcare Space

Telehealth has gone through a major boom-and-bust cycle. One promising stock emerging from the bust is Hims & Hers (NYSE: HIMS). Through nifty marketing and an insurance-circumventing subscription model that delivers medicine directly to your front door, the company is taking a lot of share in the telehealth market. The stock has traded up 449% since going public, and it is up a staggering 158% in the past year.

Disruptive innovation helped bring shareholders of Hims & Hers stock major gains. But does that make the stock a buy today?

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Circumventing insurance providers and delivering to your doorstep

People in the United States get frustrated dealing with health insurance -- as you may know from personal experience. Hims & Hers aims to slowly disrupt the market with an innovative approach that bypasses insurers. It helps customers easily get generic medications that help deal with sexual health, hair loss, mental health, and other common concerns, by having prescriptions and shipments sent straight to their doors through monthly subscriptions.

Image source: Getty Images.

This model has helped Hims & Hers dominate the telehealth prescription market and reach $1.78 billion in trailing-12-month revenue. It's now trying to further expand its offerings by adding the branded weight loss drug Wegovy to its marketplace through a partnership with Novo Nordisk (NYSE: NVO). Previously, Hims & Hers sold weight loss drugs under an exemption because of supply shortages for the products, but with those shortages now resolved, it has to work with patent holders such as Novo Nordisk. Along with weight loss, it's also aiming to get into testosterone and menopause-related prescriptions.

Today, Hims & Hers has 2.4 million active customers. Management believes there are over 100 million people who could utilize one of its products, giving the company a huge runway to grow. A key factor will be the new partnership for marketing Wegovy, which is an expensive subscription at an introductory discount offer of $549 a month. Usage of such drugs is growing like a weed, and could be a new growth avenue for Hims & Hers to pursue.

Betting on international growth

Another huge step for Hims & Hers is international expansion. While countries vary in their approaches to healthcare and insurance, most people want easy-to-use products, affordable prices, and convenient at-home shipping regardless of where they live. Management hopes to supercharge international growth with its proposed buyout of competitor Zava in Europe.

Zava serves the western European market with 1.3 million active customers in the United Kingdom, France, Germany, and Ireland. The combined company can utilize Hims & Hers' marketing expertise, increasing scale, and partnerships to bring this sought-after model to Europe. Global disruption of the healthcare space will give Hims & Hers an even larger runway for growth, while also allowing it to invest in new innovations -- including at-home patient testing and its own compounding manufacturing facility.

Hims & Hers has grand ambitions to disrupt healthcare with its direct-to-consumer model, and Zava will give it even more scale to keep accelerating growth. It will be exciting to see what the combined company can do over the next decade.

Data by YCharts.

The skinny on Hims & Hers stock

You can feel the excitement with Hims & Hers and its explosive revenue growth. Sales grew 111% year over year last quarter, and are expected to hit at least $2.3 billion in 2025. (They were just $100 million in 2020.) The company has a goal of reaching $6.5 billion in sales by 2030, which would make it one of the fastest-growing companies in the world this decade.

This fast growth has created some high expectations for Hims & Hers stock. It now has a price-to-earnings ratio (P/E) of 79, which is a high trailing earnings multiple even for a fast-growing company. However, revenue is growing so quickly and with such high margins that the company may grow into this high valuation by the end of the decade.

As noted, management has a goal of $6.5 billion in revenue in 2030. With 20% bottom-line profit margins -- easily doable with 77% gross profit margin over the last 12 months -- that would equate to roughly $1.3 billion in annual earnings in 2030. Today, the market cap is $12.3 billion, which would mean a P/E of just around 9.5 by 2030 if the market cap did not change (which is an unlikely scenario, but demonstrates that there is potential for the valuation to drop). Even with some shareholder dilution that raises the number of shares outstanding, the stock would be trading at a P/E of around 10 to 12 at the current share price (which is also likely to change).

If you believe this rapid growth will continue over the long term, Hims & Hers stock will grow into its valuation. If you have any doubts about this pace of growth, shares should be considered overvalued at the moment.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hims & Hers Health. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.