We came across a bullish thesis on Hims & Hers Health, Inc. (HIMS) on Substack by The Dutch Investors. In this article, we will summarize the bulls’ thesis on HIMS. Hims & Hers Health, Inc. (HIMS)’s share was trading at $27.60 as of Nov 13th. HIMS’s trailing and forward P/E were 62.73 and 64.10 respectively according to Yahoo Finance.
A nurse in a telehealth platform talking with a patient on video call for consultation.
HIMS, founded in 2017 by Andrew Dudum, aims to revolutionize healthcare accessibility by offering affordable telehealth services. The American healthcare system’s inefficiencies, such as the high costs and time-consuming process of seeing a doctor, have pushed many to seek alternatives like Hims. The platform provides customers with access to certified doctors online for as low as $20-$30 per month, offering unlimited consultations and home delivery of prescriptions. Hims simplifies the healthcare process, eliminating traditional barriers, and focuses on personalized treatments, particularly in areas like hair loss, mental health, erectile dysfunction, and weight loss.
The company’s business model revolves around providing recurring, subscription-based revenue, with over 90% of its income coming from customers who pay on a regular basis for continuous treatment. Hims has found success in growing its customer base, with 1.9 million subscribers by Q2 2024, representing a 43% increase year-over-year. This growth in subscribers is outpacing revenue, which rose 52% compared to the same period the previous year. The company’s gross margins are consistently high, between 80-83%, and its net profit margin has improved significantly, reaching 4% in 2024. Hims also maintains an adjusted EBITDA margin of 10-11%, demonstrating its ability to generate strong profits from its business operations. The company’s payback period for customer acquisition costs is also notably efficient, typically under a year, reflecting its strong return on invested capital (ROIC), which stands at an impressive 88.9%.
Hims is led by founder and CEO Andrew Dudum, who has a significant ownership stake in the company, ensuring alignment with shareholder interests. Dudum’s track record as an entrepreneur with previous ventures, including Atomic and Ever.com, bolsters confidence in his leadership. While the company faces competitive risks from larger firms like Amazon and regulatory challenges, Hims has positioned itself as a leader in telehealth with a 49% market share. Its broad range of services and high customer retention rate set it apart from competitors, most of which focus on just one segment, like hair loss.
In terms of valuation, Hims has shown impressive growth with a 95% CAGR from 2018 to 2023. However, it’s unlikely to sustain this pace in the long run. The company is projected to grow at 35% annually over the next five years, supported by new product rollouts, service expansions, and increasing market share. With a net profit margin of 6% and an exit multiple of 25, Hims is expected to offer investors a 10% annual return. While the bear case might seem unlikely due to its already established profit margins, Hims remains a high-growth, profitable business with significant long-term potential.
Hims & Hers Health, Inc. (HIMS) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held HIMS at the end of the second quarter which was 29 in the previous quarter. While we acknowledge the risk and potential of HIMS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HIMS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.