If you follow the healthcare sector and are familiar with the complexities of medical payments, you may be wondering how to invest in Waystar Technologies (WAY 3.75%). Waystar Technologies is a software-as-a-service (SaaS)-based company that allows healthcare providers to manage payments using a single cloud-based platform.
Established in 2017 through the merger of revenue cycle technology providers Navicure and Zirmed, the company says it facilitates 4 billion healthcare transactions annually, amounting to $900 billion in annual gross claims.
Waystar Technologies is a revenue cycle management (RCM) software company. RCM essentially includes all the processes healthcare providers use to get paid in a timely manner. Its many steps include confirming a patient's insurance eligibility when they schedule an appointment, assigning proper medical codes, billing insurance companies, collecting payments, and managing claim denials.
The labyrinth of steps is a time suck for providers and leaves lots of room for errors. Waystar says its internally developed artificial intelligence (AI) and proprietary algorithms allow doctors and medical facilities to automate many of their processes while improving efficiency and accuracy.
How to invest
How to buy Waystar Technologies stock
Waystar Technologies went public in June 2024, offering 45 million shares of its common stock at $21.50 per share. The Louisville, Kentucky-based company had initially planned to make its stock market debut in late 2023 but pushed back plans amid a shaky initial public offering (IPO) market. The company now trades on the Nasdaq exchange under the ticker WAY.
IPO
Now, anyone can buy shares of Waystar Technologies by following these four steps.
1. Open a brokerage account
Once you choose the financial institution where you want to open a brokerage account, you'll need to provide a few pieces of information, such as your name, address, date of birth, and Social Security number. You'll also need to choose the type of account to open.
If your goal is to build a nest egg, you could opt for an individual retirement account (IRA). But if you want to access your funds before retirement without a penalty, you could open a taxable brokerage account.
2. Figure out your budget
Once you've opened your brokerage account, you'll need to decide how much you want to invest. Diversification is essential when investing in stocks because you must spread out your risk. So, whether you're investing in Waystar Technologies or another company, any individual stock should make up only a small fraction of your overall investment budget.
3. Do your research
Before you invest in any company, you should be familiar with its business model, how it makes money, its competitive advantage, and its risk. A company that's been publicly traded for a long time will have a decent amount of information available, including earnings call transcripts and annual reports.
4. Place an order
Once you've funded your account and decided what stocks you want to buy, you can place an order by entering the stock's ticker and the number of shares you want. You'll need to choose between a market order and a limit order.
With a market order, you're telling your broker to immediately buy the number of shares you specified at market price. With a limit order, you tell your broker to execute the trade only at a specified price.
Should I invest?
Should I invest in Waystar Technologies?
You might want to consider investing in Waystar Technologies if:
- You understand Waystar's products and believe they have the potential to simplify healthcare payment processing.
- You already have a well-diversified investment portfolio and are looking for additional healthcare technology exposure.
- You can afford to lose money, particularly in the short term.
- You're comfortable investing in a company that's not yet profitable.
- You plan to hold the stock for at least three to five years and believe it can outperform the S&P 500 index in the long term.
On the other hand, here are some reasons you may want to avoid Waystar Technologies:
- You're seeking dividend income, as dividend payments are rare when you invest in SaaS companies and IPO stocks.
- You want to earn a quick profit and don't plan to make the stock a long-term holding.
- You don't understand how the company makes money.
- You don't believe the company has a wide economic moat.
Profitability
Is Waystar Technologies profitable?
According to its S-1 filing, Waystar Technologies is not yet profitable -- which isn't especially unusual for SaaS companies. The company reported a $51.3 million loss in 2023 despite increasing revenue by 12.2% from 2022.
The company also reported a net revenue retention rate of 108% for the 12-month period that ended June 30, 2024. Net revenue retention shows the rate at which existing customers are increasing their spending and tends to be an important metric for SaaS businesses.
That's because the net revenue retention rate indicates whether the company can retain and upsell existing customers or needs to attract new customers for growth. Waystar's 108% net retention rate shows that its customers upped their spending by 8% in the 12 months leading up to June 2024.
Dividends
Does Waystar Technologies pay a dividend?
Waystar Technologies doesn't pay a dividend. Companies that have recently gone public rarely pay dividends because they often haven't reached profitability yet. Even if they are turning a profit, they typically need to reinvest their earnings into the business. Given that Waystar is a young company still losing money, people seeking investment income should pass on its stock.
ETF options
ETFs with exposure to Waystar Technologies
As of this writing, no major exchange-traded funds (ETFs) with exposure to Waystar Technologies were on our radar. However, the following funds allow you to capitalize on similar investment themes.
Exchange-Traded Fund (ETF)
Health Care Select Sector SPDR Fund (XLV)
The Health Care Select Sector SPDR Fund (XLV 1.26%) provides broad exposure to the healthcare stocks represented in the S&P 500. Its 63 holdings include pharmaceutical companies, biotechnology, healthcare providers and hospitals, and healthcare technology.
The ETF could be a smart bet if you believe the healthcare sector can grow at a faster pace than the overall economy. The fund has a low expense ratio of 0.10%, meaning only $1 of a $1,000 investment goes toward fees.
Invesco S&P SmallCap Health Care ETF
If you want to invest in healthcare and are willing to take on more risk, the Invesco S&P SmallCap Health Care ETF (NYSEMKT:PSCH) is an option. The fund invests in healthcare stocks in the S&P SmallCap 600, which comprises U.S. stocks with a market cap of between $1 billion and $6.7 billion. The ETF has 66 holdings and an expense ratio of 0.29%.
Global X Funds Global X Robotics & Artificial Intelligence ETF (BOTZ)
The Global Funds Global X Robotics & Artificial Intelligence ETF (NYSEMKT:BOTZ) is an option for investors who want to invest in the growing use of robotics and AI. The fund tracks the 44 companies in the Indxx Global Robotics & Artificial Intelligence Thematic Index. As is common for specialized ETFs, the fund's expense ratio is relatively high at 0.68%.
Stock splits
Will Waystar Technologies stock split?
Waystar Technologies hasn't split its stock in its short history and is unlikely to do so in the near future. Companies often split their stock to make it more affordable to retail investors. Unless the company's share price were to climb into the three- or four-figure range, a stock split probably is not on the horizon.
Related investing topics
The bottom line on Waystar Technologies
Healthcare in the U.S. is extraordinarily complex. If you believe Waystar Technologies has the potential to simplify revenue cycle management and the healthcare payment process in general, perhaps the stock deserves a look.
But keep in mind that investing in healthcare technology and stocks soon after their IPO is risky. Aim to build a diversified portfolio of index funds before you layer on a risky investment. Finally, limit your investment in any individual stock, whether Waystar Technologies or any other company, to no more than 5% of your portfolio.
FAQ
Waystar Technologies FAQ
What is Waystar Technologies' revenue?
Waystar Technologies reported $234.5 million in revenue for Q2 2024, up 20% year over year. In its guidance for full-year fiscal 2024, the company forecasts revenues between $902 million and $918 million.
Who are Waystar's competitors?
According to software marketplace G2, Waystar's top competitors include Essentials, TriZetto QNXT, Tebra, and NextGen Healthcare EHR.
