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QUALCOMM, Inc. (QCOM), athenahealth, Inc (ATHN): Is WebMD Health Corp. (WBMD) Destined for Greatness?

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 Chart

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 Chart

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.