Shareholders of Doximity would probably like to forget the past six months even happened. The stock dropped 59.5% and now trades at $25.35. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Given the weaker price action, is now an opportune time to buy DOCS? Find out in our full research report, it’s free.
Why Does Doximity Spark Debate?
With over 80% of U.S. physicians as members of its digital community, Doximity (NYSE:DOCS) operates a digital platform that enables physicians and other healthcare professionals to collaborate, stay current with medical news, manage their careers, and conduct virtual patient visits.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Doximity’s 29.3% annualized revenue growth over the last five years was impressive. Its growth surpassed the average software company and shows its offerings resonate with customers.
2. Customer Acquisition Costs Are Recovered in Record Time
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Doximity is extremely efficient at acquiring new customers, and its CAC payback period checked in at 6.4 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
One Reason to be Careful:
Weak Billings Point to Soft Demand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Doximity’s billings came in at $151.2 million in Q4, and over the last four quarters, its year-on-year growth averaged 14.1%. This performance slightly lagged the sector and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
Final Judgment
Doximity’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 7.3× forward price-to-sales (or $25.35 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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