If you want growth for a dirt cheap price, look no further than some of the healthcare industry's most innovative players, like Teladoc Health (TDOC -1.62%) and Doximity (DOCS -0.95%). Teladoc is a leader in the high-growth area of telemedicine. And Doximity is a platform that connects doctors to each other -- and to their patients. Both companies are reinventing the doctor-patient experience, and for the better.
Shares of these players have suffered over the past year. But they still have solid long-term prospects. And that's why today, they look ripe for a rebound.
Still, just one makes the better buy right now. Which stock should you go for? Let's find out.
The case for Teladoc
Teladoc disappointed investors last year when it reported two billion-dollar goodwill impairment charges. They were linked to its purchase of chronic care specialist Livongo in 2020. This deepened investors' concerns about Teladoc's lack of profitability so far.
But it's important to take a long-term view. First, it's not shocking that Teladoc isn't profitable at this point in its story. The company is focusing on investing in its business to generate growth down the road.
Yes, the Livongo operation was costly -- but it brought Teladoc strengths in a key growth area. More than half of American adults suffer from at least one chronic condition. So Teladoc should benefit from its chronic care offerings over time.
Second, Teladoc narrowed its loss in the most recent quarter. The company also has shown it can steadily grow online visits and revenue in the double digits each quarter.
Finally, Teladoc offers something that many rivals don't: a complete offering. From primary care to mental health, Teladoc strives to treat the "whole person." And the company says that's helping it win clients over from competitors.
Now, let's talk valuation. The telemedicine giant is trading at its lowest ever in relation to sales. Considering the company's progress so far and position in a market growing in the double digits, the stock looks like a steal today.
TDOC PS Ratio data by YCharts
The case for Doximity
Doximity may be the best friend of doctors. About 80% of all U.S. doctors use this online platform. They can reach out to colleagues, easily find the latest research in their field, and even conduct patient visits over their phones -- without revealing their personal number.
All of this makes Doximity the best friend of another group: those who aim to advertise to doctors. The top 20 pharmaceutical companies and the top 20 hospital systems are all clients of Doximity. And they keep returning year after year.
As a result, Doximity's earnings have been rising over time.
DOCS Net Income (Annual) data by YCharts
In the most recent quarter, Doximity reported double-digit gains in total revenue, operating cash flow, and free cash flow.
Last year, investors worried that higher inflation, weighing on ad spending, would hurt Doximity's revenue. But, as the recent earnings report showed, that hasn't happened.
As for pharma clients, Doximity targets the 415 brands with more than $100 million in U.S. sales. The company works with more than half of them. At the same time, Doximity has reached less than 5% of potential U.S. medical marketing budgets -- so there's plenty of room for growth.
Today, Doximity trades at 48 times forward earnings estimates, down from 75 about a year ago. So, like Teladoc, this stock too looks pretty cheap.
Teladoc or Doximity?
Teladoc and Doximity both have declined more than 40% over the past year. They both are growing revenue in the double digits and have a strong client base. And future prospects look bright for these two companies.
But if I absolutely had to choose just one of these innovative stocks to buy right now, I'd go for Doximity. The company is already profitable, so it offers more stability at this point. Yes, Teladoc is making progress toward profitability -- but if it falters during any particular quarter, this could shake investor confidence and delay recovery.
So, for Doximity's earnings strength and very reasonable valuation, it looks like the better stock to snap up today.
