Because price is often seen as a proxy for quality, investors sometimes look at stocks whose price tags look relatively cheap with suspicion. However, there are quality companies to buy shares of with almost any budget. Even with $100 -- or substantially less -- you can find exciting corporations that could deliver excellent returns ahead.
Here are two examples in the healthcare industry: Doximity (DOCS +0.27%) and Teladoc Health (TDOC +0.47%). You can afford to buy four shares (two of each) with $100, with some spare change left over. Here's why that could be a great move.
NYSE: DOCS
Key Data Points
1. Doximity: $22.78 per share
Doximity is an online networking platform for medical professionals. However, physicians can do much more than look for jobs on Doximity. It also allows them to read up on the latest news in their fields, check out relevant peer-reviewed research, conduct telemedicine visits with their patients, securely send and receive important confidential medical records, and more.
Doximity makes money by charging fees to the health systems and pharmaceutical companies that use its platform. They can communicate directly to doctors to advertise job opportunities (or, for pharma companies, medicines). Doximity benefits from the network effect: the more physicians on its platform, the more attractive it becomes. The company estimates that over 80% of U.S. doctors use its service.
Financial results have generally been pretty solid although Doximity's top-line growth rates have slowed recently, which is one of the key reasons its shares have struggled over the past year.
DOCS Revenue (Quarterly YoY Growth) data by YCharts.
In its latest period -- the first quarter of its fiscal 2024, which ended June 30 -- Doximity reported revenue of $108.5 million, an increase of 20% year over year. The company's adjusted net income per share was $0.19, an increase of 35.7%. Its gross margin remains excellent, coming in at 90.3% compared to 88.1% in the year-ago quarter.
Even with the declining revenue growth, Doximity can bounce back. Given the company's position as a leading platform for physicians, its economic moat, and the fact that medical spending will only increase, it's unlikely to become irrelevant anytime soon.
Physicians control more than 73% of healthcare spending, according to the company. Doximity's platform should continue attracting pharmaceutical companies and other third parties seeking to advertise to physicians. The company estimates an addressable market of $18.5 billion -- and its annual revenue isn't even close to $1 billion yet. In other words, it has substantial room to grow, which is a great sign for investors.
NYSE: TDOC
Key Data Points
2. Teladoc Health: $18.17 per share
Teladoc is a telemedicine specialist that rose to popularity amid the early days of the pandemic. However, the company has lost all the share-price gains it accumulated due to slowing sales growth and recurring net losses. Still, there are good reasons to invest in Teladoc.
First, telehealth wasn't just a pandemic fad. Various polls in the past couple of years have concluded that patients and physicians intend to continue scheduling virtual consultations. For instance, a 2022 survey conducted by Phreesia -- a company that offers software services to healthcare systems -- found a satisfaction rate of 71% among the 36% of patients in the survey who had used telehealth in the past six months. It also found that 84% of them said they were somewhat or very likely to use virtual care again in the next year, mainly because it's convenient and saves time.
This is an important aspect of Teladoc's business that is perhaps best exemplified by its platform for virtual therapy, BetterHelp. It does not offer on-site visits, which allows therapists to save money on overhead costs -- and these cost savings get transferred to consumers. BetterHelp's prices are lower than those of traditional on-site therapy sessions. Through BetterHelp and other services, Teladoc has become one of the most recognizable brands in telemedicine, a major advantage.
The company is also building a network effect similar to that of Doximity.
What about its financial results? In the third quarter, Teladoc's revenue of $660.2 million increased by 8% year over year. The company's net loss per share of $0.35 was better than the loss per share of $0.45 reported in the year-ago period. BetterHelp ended the quarter with 459,000 paying users, an increase of 5% year over year.
The company's U.S. integrated care members and chronic care services finished the period with 90.2 million and 1.12 million members, respectively. The former grew by 10% year over year, while the latter did so by 13%. Teladoc's adjusted gross margin was a strong 71.8%, higher than the 69.6% reported in the third quarter of 2022.
Although not as strong as earlier in the pandemic, Teladoc's revenue growth shouldn't be a deal breaker, especially considering the progress it's made elsewhere -- its ecosystem has strengthened considerably over the past three years. Still, Teladoc's share price is much lower than in early 2020. At these levels, long-term investors can safely buy and hold the stock.
