We came across a bullish thesis on Doximity, Inc. (DOCS) on Business Invest’s Substack by Business Invest. In this article, we will summarize the bulls’ thesis on DOCS. Doximity, Inc. share was trading at $43.35 as of Oct 10th. DOCS’s trailing and forward P/E were 54.19 and 41.67 respectively according to Yahoo Finance.
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Doximity (DOCS) is a leading digital platform catering specifically to U.S. medical professionals, often referred to as the “LinkedIn for doctors.” With over 80% of U.S. physicians verified as members, it serves as a comprehensive professional network offering secure messaging, telehealth services, and a physician directory. Doximity generates revenue across three key segments. Its primary source, advertising and marketing solutions (over 80% of total revenue), allows pharmaceutical companies, hospitals, and healthcare systems to target ads directly at medical professionals. Telemedicine, accounting for less than 15% of revenues, is driven by the Doximity Dialer, which enables virtual appointments. Hospitals pay for access to premium telehealth features, enhancing virtual care services. The hiring solutions segment, though currently experiencing negative growth, offers hospitals a direct way to recruit top medical talent via Doximity’s physician database.
Doximity looks interesting as the company boasts a high level of user adoption among U.S. physicians and has shown strong financials, with 95% of its revenue being subscription-based and a notable 114% net revenue retention rate. Over the past three years, Doximity has achieved a revenue CAGR of 26.6%, with marketing solutions alone growing by 19% year-over-year.
Telemedicine offers significant potential with the overall market projected to grow at a 17.1% CAGR through 2030, presenting a clear opportunity for Doximity to expand further in this segment. Additionally, the company is founder-led, with Jeff Tangney holding 27% of shares, which aligns management’s interests with shareholders. Key financial metrics reinforce Doximity’s solid standing: a 38% operating margin, 48% return on invested capital (ROIC), and 105% free cash flow conversion. The company has almost no long-term debt, a high current ratio of 6.7, and controlled dilution with 0% shares outstanding CAGR over the past three years. Despite recent stock gains, Doximity’s valuation may still offer room for upside, particularly if it captures more market share in telemedicine or sees improvement in its hiring segment.
Doximity, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held DOCS at the end of the second quarter which was 23 in the previous quarter. While we acknowledge the risk and potential of DOCS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DOCS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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DOCSclosure: None. This article was originally published at Insider Monkey.