About Doximity
To keep what could’ve been a long story short, Doximity is for all intents and purposes LinkedIn but for doctors.
Based in San Francisco, California, Doximity is a digital network through which physicians can interact with one another, perhaps by connecting and sharing articles or other general messages with each other as well as forwarding or exchanging pertinent medical information regarding past or current patients in order to gain a clearer picture of one’s medical history.
Members (doctors, primarily) on the platform are verified, thank goodness.
In addition to the social element of the platform, Doximity also offers a Dialer function that enables doctors the ability to get in contact with medical staff members and/or patients in a timely manner when they are away from their office or the hospital while shielding their personal contact information with a newly generated phone number, perhaps with the name of the hospital or the name of the physician appearing on the call log.
With the rise of virtual healthcare (better known as telehealth), it seems as though Doximity is staying with the times with its Dialer feature, however, being that the meat and potatoes of this company is rooted in its media and networking segment, how in the world does this company generate revenue?
Well, the company seems to generate most of its revenues through the subscription fees it charges those that wish to advertise on the platform, which, according to the same source, consists largely of hospitals and pharmaceutical companies.
This is a fairly straightforward and common business model employed by other social media companies and platforms.
While we definitely view this company’s business overall as an interesting concept and one that was going to happen at some point (it was just a matter of who and when), we have our initial reservations with respect to this company relying a bit too much on advertising revenue, as it seems as though even the largest, most insulated (not really) technology companies and platforms are vulnerable to the all too cyclical digital advertising realm.
If this is the case, where does this leave a company such as Doximity as its revenue streams are far less diversified than, say, an Alphabet (the parent company of Google) or a Meta Platforms?
Sure, we think when everything is good and well in the economy this company is ready and set to do quite well through its advertising partners, however, when the good times roll over and advertising spending dries up a bit, Doximity’s top and bottom lines are seemingly exposed to a frightening degree.
Candidly, it can be quite challenging for social media platforms to turn a positive trailing twelve month (TTM) net profit and we are sympathetic but, still, we want to be part owners of companies that have better chances of performing well during recessionary periods, not worse.
In comes some of the core financial figures and metrics behind the star of today’s stock analysis article, Doximity.
Doximity’s stock financials
In getting things started, it can be found that this company has a market capitalization of $6.71 billion, a prevailing share price of $34.45 along with a price-to-earnings (P/E) ratio of 63.78 as well as no annually distributed dividend at the moment.
Within this information it can be found that Doximity’s stock (NYSE: DOCS) is trading well above its fair, intrinsic value (the standard, commonly held fair value benchmark is 20 and anything greater than that value indicates that a security is trading at a premium, or it is simply overvalued), however, it should be understood that some exceptions can be made in this respect if a company is growing at a rapid rate, particularly in terms of its year-over-year (YOY) revenues.
Shortly, we will see if this happens to be the case with Doximity, however, if it is not, it is quite difficult to reasonably justify paying this much of a premium for an ownership stake in this company through its stock.
Additionally, the fact that this company doesn’t issue its shareholders an annual dividend is far from concerning to us given that most younger technology companies do not offer dividends so as to continue investing and reinvesting in its platforms and offerings, which we avidly support, especially for a company such as Doximity.
In attaining some more information about this company and its core financials, Doximity’s executives are in charge of and responsible for just about $1.1 billion in terms of total assets as well as $171 million in terms of total liabilities, according to its displayed balance sheet.
This is a fantastic balance sheet, as its total assets largely outweigh the cumulative amount of its liabilities, heavily insinuating that it is well prepared for any sort of recessionary storm clouds that continue rolling its way or towards the technology sector more broadly.
Nevertheless, we do hope that this company straps itself up with a little bit of debt so as to continue financing the growth of its business, that is, of course, if it is growing to begin with.
We just want to see this company put some more capital to work is all, as it doesn’t seem to even be close to becoming overleveraged from the standpoint of its balance sheet.
With respect to the company’s income statement, Doximity’s total annual revenues (since 2019) have grown each and every year, which is yet another tailwind for this company, as it is seemingly steadily yet meaningfully expanding its subscriber base and attracting more eyes to its platform overall.
For some more specific figures, the company’s annual revenues in 2019 stood at around $85.7 million, climbing the next year to $116.3 million, $206.9 million in 2021, rising all the way to the top at its most recently reported revenue figure (displayed on TD Ameritrade’s platform) of just north of $419 million.
This company is doing something right with respect to growing its top-line even amidst past and current inflationary and interest rate-related pressures.
We just hope this company isn’t burning through too much cash in the process.
In hopes of figuring this out, it would serve us well to reference Doximity’s cash flow statement, which shows positive net income and total cash from operations figures (again, referencing since 2019) which is somewhat rare in younger tech companies (launched in 2010) but nevertheless a resounding positive for investors trying to get a closer, objective look inside of this company and its financials, as it hints at the fact that this company is fairly cash flow generative.
Let’s verify this by taking a look at the company’s listed trailing twelve month (TTM) net profit margin.
Doximity’s stock fundamentals
According to the figures shown on TD Ameritrade’s platform, Doximity maintains a TTM net profit margin of a whopping 26.92% compared to the industry’s listed relative average of -20.62%.
I guess it pays to corner and dominate a market, friends, and it seems as though while likely many others have tried their hand at properly putting together a networking, messaging and advertising platform for physicians, Doximity has seemingly done it best, which makes sense given that it is reported that 80% of physicians use the platform along with 90% of medical students, through this establishing a notable fortress around its business, which, of course, we enjoy.
In addition to the company’s strong TTM net profit margin, Doximity’s TTM returns on both assets and investment(s) trump those of the industry’s respective averages.
For instance, the company’s listed TTM return on assets stands tall at 10.6% to the industry’s respective average of -1.62%, implying that this company is doing a great job at extracting returns from the technology and other assets under its corporate umbrella.
Should you buy Doximity stock?
The results are in and these numbers are for real.
While we still have our general concerns with respect to the company’s lack of diversity as it relates to its revenue streams, where it is producing revenues it is apparently doing a phenomenal job with connecting and engaging with those that use its platform as a network as well as a marketing platform.
With a TTM net profit margin that is frankly miles better than that of the industry’s average, its already developed competitive moat, its pristinely asset-heavy balance sheet, its cash flows and its growing revenues, Doximity seems to be firing on all cylinders and although its stock (NYSE: DOCS) is objectively overvalued at the moment, it is currently down around 37% over the last five year’s span of time which to us presents an opportunity to inch into this company’s stock while it is still considered historically low, not to mention that it is indeed growing its revenues annually.
We give the company’s stock a “buy” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.