The operator of virtual platforms for medical professionals Doximity, Inc. (DOCS - Get Rating) recently reported its solid third-quarter results. Its revenues and EPS beat Street estimates by 13% and 142%, respectively. It also announced the acquisition of Amion, a leading on-call physician scheduling site, to expand its physician cloud platform.

The stock is currently trading 46.7% below its all-time high of $107.79, which it hit on September 10, 2021. Moreover, it faces stiff competition in the emerging telehealth space, with several new entrants and mega players vying for market share since the onset of the pandemic. So, DOCS’ near-term prospects look uncertain.

Here’s what could influence DOCS’ performance in the upcoming months:

Strong Financials

For the fiscal third quarter ended December 31, 2021, DOCS’ revenue surged 57.6% year-over-year to $97.88 million. The company’s adjusted EBITDA grew 116.1% year-over-year to $46.98 million, while its non-GAAP net income came in at $63.63 million, representing a 226.6% year-over-year increase. Also, its non-GAAP EPS came in at $0.29, up 314.3% year-over-year.

High Profitability

In terms of trailing-12-month EBITDA margin, KIM’s 34.75% is 524.6% higher than the industry average of 5.56%. Likewise, its trailing-12-month gross profit margin of 88.62% is 57.5% higher than the industry average of 56.29%. Moreover, the stock’s trailing-12-month asset turnover ratio of 0.56% is 62.9% higher than the industry average of 0.34%.

Stretched Valuation

In terms of forward EV/S, DOCS’ 29.25x is 535.6% higher than the industry average of 4.60x. Likewise, its forward P/S of 31.20x is 481.4% higher than the industry average of 5.37x. Moreover, the stock’s forward EV/EBITDA and non-GAAP PEG of 68.03x and 8.45x are higher than the industry averages of 13.55x and 1.74x, respectively.

POWR Ratings Don’t Indicate Enough Upside

DOCS has an overall rating of C, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. DOCS has a D grade for Value, in sync with its higher-than-industry valuation ratios.

DOCS also has a C grade for Sentiment. This is justified as analysts expect its EPS to decline by 2.6% in fiscal 2023.

Moreover, the stock has a C grade for Momentum, consistent with its 36.4% decline over the past six months.

DOCS is ranked #43 out of 85 stocks in the D-rated Medical – Services industry. Click here to access all of DOCS’ ratings.

Bottom Line

DOCS looks overvalued at the current price level, so it could be wise to wait for a better entry point in the stock.

How Does Doximity (DOCS) Stack Up Against its Peers?

While DOCS has an overall POWR Rating of C, you might want to consider investing in the following Medical – Services stocks with an A (Strong Buy) rating: McKesson Corporation (MCK - Get Rating), NextGen Healthcare, Inc. (NXGN - Get Rating), and Computer Programs and Systems, Inc. (CPSI - Get Rating).

DOCS shares fell $0.47 (-0.82%) in after-hours trading Thursday. Year-to-date, DOCS has gained 14.54%, versus a -9.82% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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