The past six months have been a windfall for Hims & Hers Health’s shareholders. The company’s stock price has jumped 40.2%, hitting $29.23 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy HIMS? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.
Why Does Hims & Hers Health Spark Debate?
Originally launched with a focus on stigmatized conditions like hair loss and sexual health, Hims & Hers Health (NYSE: HIMS) operates a consumer-focused telehealth platform that connects patients with healthcare providers for prescriptions and wellness products.
Two Things to Like:
1. Customer Base Skyrockets, Fueling Growth Opportunities
Revenue growth can be broken down into the number of customers and the average spend per customer. Both are important because an increasing customer base leads to more upselling opportunities while the revenue per customer shows how successful a company was in executing its upselling strategy.
Hims & Hers Health’s total customers punched in at 2.89 million in the latest quarter, and over the last two years, their count averaged 25.1% year-on-year growth. This performance was fantastic, reflecting its ability to “land” new contracts and potentially “expand” them later — a powerful one-two punch for sales. 
2. New Investments Bear Fruit as ROIC Jumps
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Over the last few years, Hims & Hers Health’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
One Reason to Be Careful:
Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Although Hims & Hers Health has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 12.3%, meaning management lost money while trying to expand the business.
Final Judgment
Hims & Hers Health has huge potential even though it has some open questions, and with the recent rally, the stock trades at 21.8× forward P/E (or $29.23 per share). Is now a good time to buy despite the apparent froth? See for yourself in our in-depth research report, it’s free.
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