Shares of Doximity (NYSE:DOCS) began trading last month. The health-care stock that’s called the “LinkedIn for Doctors” provides a way for medical professionals to network and to “be more productive and provide better care for their patients,” according to the company’s prospectus.
The network is free for doctors and the company says its revenue comes from health-care systems and pharmaceutical manufacturers which it offers commercial solutions for. The company is also in the telehealth business, with 63 million visits delivered in fiscal year 2021, which ended on March 31.
In total, Doximity reported $207 million last fiscal, which was a year-over-year increase of 78% from 2020 when it revenue was just over $116 million. The company’s bottom line of $50 million this past year also grew by an impressive rate of 69%. The high-margin business that Doximity is in allows it to net approximately 85% of the top line after cost of goods sold, giving the company a great chance to post a profit.
But the problem is that the stock isn’t cheap. With a market cap of close to $10 billion, it is trading at a price-to-sales multiple of close to 50. The average health-care stock normally trades at just two times its trailing revenue.
Investors are paying a big premium to own a piece of this new issue. However, shares of the company have been falling of late and last week It closed at just over $54 – not far from its first day of trading when it finished at $53. For investors, this is a stock to watch but maybe not one to buy just yet, as more of a decline may be needed to make this an attractive investment.