Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does WebMD Health Corp. (NASDAQ:WBMD) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.
What we’re looking for
The graphs you’re about to see tell WebMD Health Corp. (NASDAQ:WBMD)’s story, and we’ll be grading the quality of that story in several ways:
Growth: Are profits, margins, and free cash flow all increasing?
Valuation: Is share price growing in line with earnings per share?
Opportunities: Is return on equity increasing while debt to equity declines?
Dividends: Are dividends consistently growing in a sustainable way?
What the numbers tell you
Now, let’s take a look at WebMD Health Corp. (NASDAQ:WBMD)’s key statistics:
WBMD Total Return Price data by YCharts.
| Passing Criteria | 3-Year* Change | Grade |
|---|---|---|
| Revenue growth > 30% | 1.7% | Fail |
| Improving profit margin | (104.4%) | Fail |
| Free cash flow growth > Net income growth | (41.8%) vs. (104.5%) | Pass |
| Improving EPS | (105.3%) | Fail |
| Stock growth (+ 15%) < EPS growth | (31.2%) vs. (105.3%) | Fail |
Source: YCharts. * Period begins at end of Q2 2010.
WBMD Return on Equity data by YCharts.
| Passing Criteria | 3-Year* Change | Grade |
|---|---|---|
| Improving return on equity | (105.7%) | Fail |
| Declining debt to equity | 883.6% | Fail |
Source: YCharts. * Period begins at end of Q2 2010.
How we got here and where we’re going
Things don’t look good for WebMD Health Corp. (NASDAQ:WBMD) today. The health information services provider earns only one out of seven passing grades, and even that single pass was granted more on a technicality than because of a genuine improvement. Can WebMD push past all of the problems of its recent past and give investors a bit of good news, for once? Let’s dig a little deeper to find out.
WebMD Health Corp. (NASDAQ:WBMD) has recently entered into a partnership with chip giant QUALCOMM, Inc. (NASDAQ:QCOM) for the expansion of its product portfolio. The new offerings focus on integrating digital health apps with third-party devices. This new avenue of tech-enhanced health care ought to support WebMD Health Corp. (NASDAQ:WBMD)’s growth in the near future, but the sustainability of that growth is far from a sure thing. Fool contributor Keith Speights notes that a number of other companies have also started building up their telemedicine capabilities using QUALCOMM, Inc. (NASDAQ:QCOM)’s technology platform.
