Health services IT company TRxADE HEALTH (MEDS) entered into a joint venture with Exchange Health, LLC in February, intending to expand medication accessibility. The stock has gained more than 35% over the past month. However, considering its negative ROE and bleak bottom line, will it be wise to invest in the stock now? Read on to find out.

Health services IT company TRxADE HEALTH, Inc. (MEDS) operates in digitalizing the retail pharmacy experience by optimizing drug procurement, prescription journey, and patient engagement. MEDS operates the TRxADE drug procurement marketplace, fostering price transparency and offering patient-centric telehealth services.

On February 15, MEDS announced the formation of a joint venture SOSRx, LLC, a pharmaceutical platform with Exchange Health, LLC. This year, the company expects growth as more progressive manufacturers are expected to address the public need for enhanced medication accessibility and a reliable supply of cost-effective pharmaceuticals.

MEDS has declined 51.9% over the past year but gained 36.5% over the past month. The stock has declined 10.8% intraday to close Friday’s trading session at $2.47.

Here is what could shape MEDS’ performance in the near term.

Bleak Bottom line

For the fiscal year ended December 31, MEDS’ net revenues decreased 42.2% year-over-year to $9.89 million. Operating loss increased 111.1% from the prior year to $5.29 million, while net loss rose 109.6% year-over-year to $5.32 million. Net loss per common share came in at $0.65, up 97% from the prior year.

Stretched Valuations

In terms of its forward EV/EBITDA, MEDS is currently trading at 14.28x, 60.1% higher than the industry average of 8.92x. The stock’s forward Price/Sales multiple of 1.92 is trading 109.5% higher than the industry average of 0.92. Its forward EV/Sales is trading at 1.74x, 47.4% higher than the industry average of 1.18x.

Bleak Profit Margins

MEDS has a trailing 12-month EBIT margin, EBITDA margin, and net income margin of a negative 53.51%, 53.44%, and 53.75%, substantially lower than their respective industry averages of 9.42%, 12.69%, and 6.61%. Its trailing 12-month levered FCF margin of a negative 5.10% compares with the industry average of 4.76%.

MEDS’ trailing 12-month ROE, ROTC, and ROA of a negative 85.40%, 46.18%, and 92.19% compare with the respective industry averages of 17.20%, 7.91%, and 6.12%.

POWR Ratings Reflect Bleak Prospects

MEDS’ POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

MEDS has a Value grade of D, in sync with its stretched valuations.

The stock has a D grade for Stability. Its five-year monthly beta of 1.03 justifies this grade.

In the 5-stock Medical – Drug Stores industry, it is ranked last.

Click here to see the additional POWR Ratings for MEDS (Growth, Momentum, Sentiment, and Quality).

View all the top stocks in the Medical – Drug Stores industry here.

Bottom Line

MEDS is expected to benefit from its joint venture. However, the company’s bleak bottom line and negative ROE are raising concerns. Furthermore, Street expects its revenue to decline 1.8% year-over-year for the quarter ended March 2022, while its EPS is expected to decrease 25% in the same quarter. Hence, the stock might be best avoided.

How Does TRxADE HEALTH, Inc. (MEDS) Stack Up Against its Peers?

While MEDS has an overall POWR Rating of D, one might consider looking at its industry peer, CVS Health Corporation (CVS), which has an overall A (Strong Buy) rating.

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MEDS shares were trading at $2.21 per share on Monday afternoon, down $0.26 (-10.53%). Year-to-date, MEDS has declined -6.36%, versus a -3.52% rise in the benchmark S&P 500 index during the same period.

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About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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