Doximity Inc. (DOCS) made its market debut on June 25, 2021. It is a well-known social networking and telemedicine company. This cloud-based platform equips its users with the resources they need to efficiently work with colleagues, securely coordinate patient care, conduct virtual patient visits, and remain updated on medical breakthroughs and news.

While the company’s shares have declined 19.2% over the past year, the stock has gained 20.4% over the past month to close yesterday’s trading session at $40.22.

DOCS’ earnings for the fourth quarter of fiscal 2022 were remarkable. Revenues for the quarter were $93.65 million, increasing 40.4% over the prior year. Also, DOCS announced that its board of directors had authorized a new stock buyback program to acquire up to $70 million of the company’s Class A common shares commencing in the first quarter of fiscal 2023.

However, the company’s poor revenue estimates for the first quarter of fiscal 2023 of $88.6 million to $89.6 million added to investors’ concerns.

Here’s what could shape DOCS’ performance in the near term:

Premium Valuation

In terms of forward non-GAAP P/E, the stock is currently trading at 57.58x, 204.1% higher than the industry average of 18.94x. Also, its forward Price/Cash Flow of 54.77x is 243.3% higher than the industry average of 15.95x. Moreover, DOCS’s forward Price/Book of 8.09x is 197.9% higher than the industry average of 2.71x.

Strong Profitability

DOCS’ trailing-12-month asset turnover ratio of 0.55% is 57.8% higher than the industry average of 0.35%. Its trailing-12-month ROC, ROA, and ROE of 13.8%, 15.6%, and 28.2%, compare to its negative industry averages. Also, its trailing-12-month gross profit margin of 88.4% is 60.2% higher than the industry average of 55.2%.

Mixed Growth Prospects

Street expects DOCS’s revenues to rise 32.5% year-over-year to $455.23 million in fiscal 2022. However, its EPS is expected to decline by 21.1% in the next quarter ending September 2022, and 8.5% in the current year.

POWR Ratings Reflect Uncertainty

DOCS has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 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 and a C for Growth. The company’s higher-than-industry valuation is in sync with the Value grade. In addition, its poor EPS growth estimates are consistent with the Growth grade.

Of the 83 stocks in the C-rated Medical – Services industry, DOCS is ranked #47.

Beyond what I’ve stated above, you can view DOCS’ ratings for Quality, Stability, Momentum, and Sentiment here.

Bottom Line

DOCS is expected to witness robust growth over the long term based on the strong U.S. digital health market prospects. However, its mixed growth prospects and lofty valuation could weigh on its price performance. So, we think investors should wait before scooping up its shares.

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

While DOCS has an overall C rating, one might want to consider its industry peer, McKesson Corp. (MCK), NextGen Healthcare Inc. (NXGN), and Viemed Healthcare Inc. (VMD), which have an A (Strong Buy) rating.

DOCS shares were trading at $40.52 per share on Friday morning, up $0.30 (+0.75%). Year-to-date, DOCS has declined -19.17%, versus a -18.74% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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