Teladoc (NYSE:TDOC) was one of the tech industry’s biggest high-profile losers in 2021. TDOC stock lost more than half its value for the year. In 2020, the company had enjoyed strong tailwinds as clients sought remote medical appointments. In 2021, though, much of this demand abated. Meanwhile, the tide went out on stocks that had been riding a stay-at-home wave.

Shareholders of companies like Zoom (NASDAQ:ZM), Peloton (NASDAQ:PTON) and Teladoc have suffered huge losses in recent months. And while some stay-at-home stocks are likely to bounce back, many will not. Teladoc in particular has a rough road ahead.

Here’s what you should know about TDOC stock moving forward.

TDOC Stock: The Financials Are Bleak

To be fair to Teladoc, it is one of the pioneers in an emerging industry. So, it’s not surprising that the company has taken awhile to find its footing. That said, it crossed the $100 million annual revenue mark in 2016 and topped $1 billion of sales in 2020. At some point, you’d start to hope to see profits here — or at least some signs of scale efficiencies kicking in.

Instead, Teladoc’s financial results somehow get worse even as it grows revenue. As mentioned, revenues are up tenfold in recent years. However, operating losses are swelling. The company lost just $53 million on $123 million of revenues in 2016. By 2019, this jumped to a $74 million operating loss on $553 million of sales. That’s heading in the wrong direction, but still seemingly manageable.

In 2020, however, the bottom dropped out. Teladoc’s operating loss soared to a startling $418 million from its $1.1 billion of sales. As the old saying goes, Teladoc loses more money on every sale but will make it up on volume. However, if the business hasn’t scaled by now (and with a pandemic to help drive adoption at that), one has to wonder if the core product will ever by capable of producing profits. It seems the profitability on the service delivered here is just too low to make the business model work.

Valuation Is Untenable

Sure, TDOC stock has already dropped substantially. But, arguably its valuation was a bubble before and not connected to any real fundamentals.

Analysts see the company continuing to run large operating losses through at least the end of 2023, if not longer. Meanwhile, sales growth is set to plunge as the company laps its strong revenue growth from the pandemic and the Livongo acquisition. Teladoc remains negative on an EBITDA basis and is burning through cash.

Given that this company has taken on some debt, it may run into financial trouble sooner or later, too, given its current trajectory. Teladoc might wish to consider raising capital now, while the equity market is still willing to fund it. That said, a secondary offering with TDOC stock below $100 would be a bitter pill for shareholders to swallow, given the heights that it had reached a year ago.

Ultimately, given that this company has no profits, cash flow, or any immediate-term hopes of generating these things, shares are only worth a few times sales (if that), leaving substantial further downside ahead.

Beware the Book Value Argument

Bulls have taken to a rather surprising argument in defense of Teladoc’s valuation, however. It’s hard to point to Teladoc’s profits or cash flow as a reason to be bullish on the stock. It produces huge quantities of red ink. Additionally, appeals to price-sales (P/S) are also dubious since Teladoc has been losing more money as it grows top-line revenues; you can always generate more sales if you cut prices far enough.

Instead, bulls are now pointing to Teladoc’s book value. Currently, TDOC stock has a book value of about $100 per share. Meanwhile, the share price has been trading below that level in recent days. In theory, Teladoc is now cheap since the value of all its assets exceeds its current stock price.

Book value is a relevant metric for a few specific industries such as insurance and banking. However, its value in software is highly questionable. Back in, say, the 1940s, it was relevant to add up all a company’s land, factories, equipment and so on since those were large assets as a proportion of the overall business. Now, though, most assets aren’t physical.

A company like Nike (NYSE:NKE) is valuable due to its brand — but that isn’t a quantifiable figure on its balance sheet. Nike’s actual land, factories and so on are a tiny fraction of its overall value. The same goes for most software companies. An investor isn’t buying Microsoft (NASDAQ:MSFT) for its office buildings, but rather its global brand and intangible assets.

As it pertains to Teladoc specifically, almost all of its purported book value is from the price it paid to acquire fellow telemedicine company Livongo. It got to capitalize a large chunk of the purchase price as an intangible asset. However, since Livongo lost gobs of money as a standalone enterprise — and because the value of telemedicine companies has collapsed subsequent to that merger — I expect Teladoc will write down most of this so-called asset in the future.

The Verdict on TDOC Stock

Two isn’t necessarily better than one. There has been little evidence to suggest that either Teladoc or Livongo has a real moat or durable business model. Rivals such as Doximity (NYSE:DOCS) appear more than capable of competing aggressively with Teladoc. And that’s before even mentioning all the big health insurers and medical networks that can build their own private-label telemedicine solutions, too.

Teladoc could potentially keep growing its top-line for awhile by underpricing the product. However, it will only get so far with its uninspiring profit margins and eye-watering operating losses. All told, the window of opportunity appears to be quickly shutting for growth companies that aren’t profitable.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.