Shares of Doximity (DOCS +0.37%) popped recently in response to a quarterly earnings report chock-full of good news. A disturbingly high market valuation, though, is leading some investors to wonder if it's already too late to buy the stock at a fair price.
Outstanding performance during its fiscal third-quarter highlighted more than a few reasons to expect big gains ahead. Here are three of the most important ones.
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1. Telehealth from a different angle
Individual patients have little to no agency when it comes to choosing a telehealth service and neither do their physicians. For example, I'd like to try using Teladoc Health but my health insurance provider decided to go with Doctor on Demand and there's nothing I can do about it.
Doximity's an increasingly popular social network for doctors and other medical professionals and not necessarily a telehealth company. However, the Doximity Dialer is effectively one of America's most popular telehealth platforms right now. At the end of 2021, there were 350,000 active providers on the platform.
The Doximilty dialer is essentially a privacy law-compliant way for healthcare providers to make video calls from their own smartphones directly to their patients. This way, it doesn't matter if a patient's insurer has a contract with Doctor on Demand or Teladoc Health. It doesn't even matter if they don't have the right app installed on their phone. All physicians need to contact their patients is a phone number.
2. Growing by leaps and bounds
You don't have to dive deep into Doximity's results to see signs of success. With a quarterly profit that more than tripled, the headline numbers are outstanding. Even after excluding a one-time provision for taxes that drove the net income figure through the roof, income from operations doubled.
| FQ3 2021 | FQ3 2022 | YoY change | |
|---|---|---|---|
| Revenue | $58.7 million | $97.9 million | 67% |
| Operating income | $17.9 million | $35.8 million | 100% |
| Net Income | $17.2 million | $55.6 million | 223% |
Data source: Doximity. FQ3 = Fiscal third quarter; YoY = Year over year.
Financial figures aren't the only ones growing at a hair-raising pace. An impressive 99% of Doximity's hospital clients renewed their telehealth agreements this year and upselling additional services has been a breeze. The company reported a net revenue retention rate of 171% during its fiscal third quarter.
Doximity's hospital clients are coming back for more in 2022. In addition to a glowing fourth-quarter earnings report, the company recently announced a plan to acquire Amion, an online platform that manages physician "on-call" schedules. Doctors spend a lot of time either wondering if they're "on" or pestering hospital receptionists to page the "on-call" physician. Amion's service already integrates with Doximity to take the guesswork out of on-call scheduling for around 200,000 U.S. physicians.
3. Network flywheel
Doximity's leveraging the popularity of its social media platform to do a lot more than just serve targeted advertisements. Useful services like Doximity Dialer and on-call scheduling keep even the most anti-social physicians in the loop. This makes introducing useful new products a lot easier than it would be otherwise.
During its fiscal third quarter, the company's e-signature and fax products saw record usage and that's not all. Healthcare providers and their employers are increasingly eager to manage continuing medical education (CME) with Doximity. During the last three months of 2021, the number of CME credits claimed on the company's platform grew 25% compared to the previous quarter.
America has suffered from a shortage of professional nurses ever since nursing became a recognized profession. The great resignation is making the eternal problem even worse but Doximity's here to help. The app is a great place to find experienced healthcare professionals who haven't switched careers yet and it shows. Job postings during the last three months of 2021 grew fourfold year over year.
Doximity stock has fallen around 45% from the peak it reached last September but it still sports a hefty $10.8 billion market cap at recent prices. That's about 76 times more than the company earned in 2021. With multiple growth engines turbocharging each other, this business could quickly outgrow its high valuation.
