Shareholders of Hims & Hers Health would probably like to forget the past six months even happened. The stock dropped 57.1% and now trades at $27.15. This may have investors wondering how to approach the situation.
Following the drawdown, is this a buying opportunity for HIMS? Find out in our full research report, it’s free.
Why Does HIMS Stock 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 Positive Attributes:
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 2.47 million in the latest quarter, and over the last two years, their count averaged 38.9% 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).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. 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 four-year average ROIC was negative 4%, meaning management lost money while trying to expand the business.
Final Judgment
Hims & Hers Health’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 30.2× forward P/E (or $27.15 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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