GoodRx (GDRX  ) was started to help consumers find the lowest prescription drug prices. One problem with the US healthcare system is the lack of price transparency across all segments. This leads to less competition which is a major contributor to prices constantly rising. In part, it's a strategy and it's also due to insurance being involved.

GoodRx's Story

This is certainly inefficient, and GoodRx's business model is to create some transparency. GoodRx's primary product is helping people compare prices at different pharmacies in their areas, and they also provide coupons that can be used at different pharmacies. They obtain these savings by negotiating with pharmacy benefit managers (PBM). And, the PBMs give GoodRx discounts, because they have such a large userbase.

GoodRx's swift rise is a reflection of its team's ability to execute and the need it's addressing. The company reports that it helps its users gain a significant discount on generics and often better prices than their insurance. Many people would be unable to afford medication without GoodRx's discounts.

In 2019, GoodRx helped its users save an aggregate of $5 billion. And since 2011, it's led to $20 billion in cost-savings total. It's currently the number 1 most downloaded medical app, and it has 17 million unique, monthly users.

Stock Price Outlook

There are several factors that make GoodRx an attractive business. For one, it has all the characteristics of a growth stock. Last year, it had revenues of $257 million which was a 33% increase from the previous year. It also has very high gross margins. Further, the company has long-term potential as it's in position to sell higher-value services to the users on its platform.

Further, it benefits from network effects, since having more users will lead to better discounts. In turn, better discounts will lead to more users. It's already branching out into adjacent fields like telehealth, pharmacy consulting, and veterinary medicine.

From another perspective, it's a classic platform business. It has 4.7 million users who use the company's app on a near-daily basis. This is a major platform from which the business can grow and continue to monetize users like other-platform businesses. However, GoodRx is a healthcare-focused business, so these services will be more expensive.

However, what differentiated GoodRx from other growth stocks is that it's already profitable. In the last year, it made $55 million in profit which was a 75% increase from the previous year. Total pharmaceutical spending in the US is nearly $600 billion so GoodRx's core business has massive upside. The potential of its platform to continue growing, adding new products and services, and becoming more effective at monetization is another reason to own the stock.