February 3, 2022

Good RX

 

GoodRx (NASDAQ:GDRX) helps consumers cut down on their prescription costs by finding coupons for the lowest local prices for their medicines and negotiating with manufacturers, pharmacies, and other providers on their behalf. Then, when pharmacy-benefit managers take their administrative fee from the pharmacy once the prescription is filled, GoodRx pockets a portion of it. Consumers can also subscribe for a monthly fee to get access to even more discounts. Between subscription income and fees, GoodRx generated $685.7 million in trailing-12-month revenue, and it's just getting started. 

The magic of this company's business model is that all of the incentives align perfectly. Patients can afford medications more easily, thereby helping them to experience better health. As a result, manufacturers lose fewer potential sales to price sensitivity among consumers. And healthcare providers don't need to worry about their patients having worse health outcomes from putting off spending on expensive but critical drugs. 

While it isn't profitable yet, its quarterly revenue has increased by 72.3% since January 2020. More importantly, the number of monthly active consumers using its service has increased by 31% year over year, reaching more than 6.4 million people as of 2021's third quarter. And its quarterly adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) have grown by 16%, reaching $61.8 million.

As long as people need to spend less on their medications, the business will keep growing. If GoodRx can keep onboarding more consumers every year, it'll increase its economies of scale when it comes to negotiating with drug manufacturers and pharmacy-benefit managers, and that'll likely support a higher profit margin and more earnings accordingly.

Therefore, it's definitely worth picking up a few shares while it's in a downtrend with the rest of the market if an investor's looking for a stock that has the potential to multiply in value.

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