After Another Blowout Quarter of Surging Revenue, Is Hims & Hers Stock a Once-in-a-Decade Buy?

Hims & Hers Health (NYSE: HIMS) reported another blowout quarter recently, but the stock didn't get the type of pop that might typically be seen with such an earnings beat. The stock has been very volatile this year, with its shares trading up and down on any news related to GLP-1 weight loss drugs. So far, the news has generally been good and the stock has still climbed by more than 225% over the past year.

Let's take a closer look at the telehealth company's most recent results to see if it could still be a once-in-a-decade buy.

A blowout third quarter for Hims & Hers

Hims & Hers once again delivered a blowout quarter with surging revenue. Revenue soared 77% year over year to $401.6 million, coming in well ahead of the $375 million to $380 million in revenue it forecast and the $382.2 million analyst consensus. Net orders jumped 20% to 2.66 million, while average order value (AOV) soared 48% to $147.

Subscribers increased 44% year over year to 2.05 million, with 180,000 net new subscribers added in the quarter. The company said that over half its subscribers now use personalized subscriptions and noted that it surpassed 400,000 Hers subscribers in the quarter across specialties, including dermatology. Management said the female-focused part of its business is hitting an inflection point.

Image source: Getty Images.

Meanwhile, it said the majority of its subscribers are not GLP-1 subscribers, and that excluding GLP-1, its subscriber base grew by 40% year over year. However, it did say its existing subscriber base is starting to adopt weight loss solutions, while subscribers who initially started with weight loss have also moved to other specialties. Meanwhile, the company said that 85% of GLP-1 subscribers continue to take their prescriptions four weeks after it is first prescribed and that 70% remain on it at 12 weeks.

Hims & Hers ramped up its marketing spend in the quarter to $182.3 million, an increase of 57%. As a percentage of revenue, though, it came in at 45% versus 51% a year ago, showing its marketing leverage despite the big jump in spending. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to $51.1 million from $12.3 million a year ago and from $39.3 million in Q2. Adjusted earnings per share (EPS) came in at $0.32, crushing analyst estimates calling for EPS of $0.10. Operating cash flow more than tripled to $85.2 million from $25.2 million a year ago, while free cash flow came in at $79.4 million, more than 4 times last year's number.

Given the strong results, Hims & Hers yet again raised its full-year guidance. It now expects revenue to be between $1.46 billion and $1.465 billion with adjusted EBITDA of between $173 million and $178 million. Some of the company's guidance changes are detailed below:

Data source: Hims & Hers.

For the fourth quarter, Hims & Hers guided for revenue to come in between $465 million and $470 million, representing growth of 89% to 91% from the $246.6 million it reported a year ago. It's looking for adjusted EBITDA in Q4 to be between $50 million and $55 million.

Is Hims & Hers a once-in-a-decade buy?

While Hims & Hers is often viewed as a GLP-1 winner that could be at risk when shortages are resolved, the company is about much more than GLP-1 drugs. The company did not give a revenue contribution from GLP-1 drugs, but you can back into the numbers. With 40% subscriber growth coming from non-GLP customers, that would indicate that it has about 50,000 GLP-1 customers. If every customer was on the platform the entire month and paying the $199 a month, that would be $30 million in revenue. Now, every subscriber wouldn't have been on the platform the entire time, but the company also has some existing subscribers who have started using the product.

As such, my guess is that GLP-1 contributed around $30 million in revenue in the quarter. Even if its as high as $40 million, that would be just 10% of revenue in the quarter. As such, Hims & Hers' revenue would have still grown by 60% when excluding the contribution from GLP-1 drugs.

Despite the stock's big run over the past year, its valuation is very inexpensive at a forward price-to-earnings (P/E) ratio of under 26 times based on 2025 analyst estimates. For a company growing its revenue by well over 50% when excluding GLP-1 drugs with a gross margin near 80%, that's a huge bargain. Its PEG (price/earnings-to-growth) ratio, meanwhile, is only 0.1, which is extremely low considering that a PEG of 1 is generally considered fairly valued.

HIMS PE Ratio (Forward 1y) data by YCharts

While there remain questions around compounding GLP-1 drugs, Hims & Hers is much more than a one-trick pony. Meanwhile, it will bring the first generic GLP-1 drug to its platform next year. It also continued to argue on its earnings call that "the precedent specifically on the GLP-1 side for personalization and [the use of outside compounding facilities in approved circumstances] has existed for many, many years" and that it can personalize drugs like semaglutide to avoid nasty side effects.

The company uses a compounding personalization strategy across its portfolio, so it can point to Hims & Hers using this compounding alternative for instances beyond GLP-1 drugs. Given the company's valuation and growth, even without GLP-1 drugs, I think Hims & Hers is a strong buy for the long term. That said, expect a lot of continued volatility in the stock.

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Geoffrey Seiler has positions in Hims & Hers Health. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.