Buy, Sell, or Hold HIMS Stock?
Hims & Hers Health (NYSE: HIMS), a telehealth platform, saw its stock surge 8% on Friday, May 30th, following the announcement of a 4% workforce reduction. This adjustment comes as the company adapts to a U.S. ban, effective May 22nd, on manufacturing mass copies of the weight-loss drug, Wegovy. Despite this regulatory change, HIMS has strategically partnered with Novo Nordisk to offer discounted Wegovy on its platform. This news contributes to an already impressive year for HIMS, with its stock up a remarkable 125% year-to-date.
The significant year-to-date gains naturally lead to the question of whether HIMS stock remains a compelling buy at its current price of around $57. From a valuation perspective, the stock appears expensive. However, this high valuation is largely underpinned by the company’s solid financial performance. This makes HIMS a tricky pick for new investments at its current price. We see minimal cause for immediate concern with HIMS stock due to its strong underlying performance, but investors should be aware of its heightened sensitivity to any negative news or market shifts.
Our conclusion is based on a comprehensive analysis comparing HIMS’s current valuation with its recent operating performance and both its current and historical financial condition. Our in-depth assessment of Hims & Hers Health focuses on key parameters: Growth, Profitability, Financial Stability, and Downturn Resilience. This analysis indicates that the company demonstrates very strong operating performance and financial health. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – Plug Power’s Hydrogen Hopes Dashed?
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Lofty Valuations
HIMS stock is expensive by most measures. The company trades at 6.6 times its sales, more than double the S&P 500’s 3.0 ratio. Its price-to-earnings ratio sits at 72.1, nearly three times higher than the market’s 26.4. Even when looking at free cash flow, HIMS commands 35.5 times its cash generation, compared to 20.5 for the broader market. But how is HIMS able to command such lofty valuations?
Exceptional Growth Story
What justifies these high valuations is HIMS’ remarkable growth. The company has expanded its revenues at an average rate of 78% over the past three years, while the S&P 500 managed just 5.5%. This growth accelerated recently, with revenues jumping 86% to $1.5 billion in the last 12 months. The most recent quarter showed even stronger momentum, with revenues soaring 111% to $481 million.
Robust Cash Flow Margins
Despite the impressive top-line growth, HIMS’s profitability tells a more modest story. The company’s operating margin of 6.2% falls well below the S&P 500’s 13.2%. However, its operating cash flow margin of 18.7% exceeds the market average of 14.9%, showing the company generates decent cash despite lower operating profits. Net income margin sits at 9.2%, slightly below the market’s 11.6%.
Rock-Solid Balance Sheet
HIMS demonstrates exceptional financial strength. With only $63 million in debt against a $13 billion market value, the company maintains a debt-to-equity ratio of just 0.5% compared to 19.9% for the S&P 500. The company also holds substantial cash reserves, representing 36.2% of total assets versus 13.8% for the broader market.
Investment Verdict
HIMS presents a compelling but risky investment opportunity. The company combines extremely strong growth and financial stability with neutral profitability and volatility concerns. While the business fundamentals appear sound, the high valuation leaves little room for growth. Investors seeking exposure to HIMS’ growth potential should be prepared for significant price swings and consider their risk tolerance carefully. For perspective, during the 2022 inflation shock, HIMS plummeted 87.3% from its peak, far worse than the S&P 500’s 25.4% decline. However, the stock recovered fully by June 2024 and reached new highs of $68.74 in February 2025.
Overall, the stock’s current price reflects optimistic expectations for continued rapid growth. If HIMS can maintain its expansion trajectory while improving profitability, the valuation may prove justified and it may see higher levels. However, any stumble in growth or broader market weakness could trigger substantial price corrections, given the premium investors currently pay.
Just remember – HIMS stock is prone to volatility and wild swings. As a long-term investment option, you can explore the Trefis High Quality (HQ) Portfolio, which is rooted in quality that is considerably less volatile, and seeks reliability, predictability, and compounding growth. With a collection of 30 stocks, it has a track record of comfortably outperforming the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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