Doximity currently trades at $57.04 per share and has shown little upside over the past six months, posting a small loss of 1.4%.

Does this present a buying opportunity for DOCS? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.

Why Does Doximity Spark Debate?

Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.

Two Things to Like:

1. Billings Surge, Boosting Cash On Hand

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 punched in at $183.6 million in Q1, and over the last four quarters, its year-on-year growth averaged 23.5%. This performance was impressive, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

2. Customer Acquisition Costs Are Recovered in Record Time

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Doximity is extremely efficient at acquiring new customers, and its CAC payback period checked in at 5.9 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Doximity more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.

One Reason to be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Doximity grew its sales at a 18.4% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Doximity.

Final Judgment

Doximity’s positive characteristics outweigh the negatives, but at $57.04 per share (or 18.5× forward price-to-sales), is now the right time to buy the stock? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Doximity

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