1 Unique Business to Buy and Hold for the Next 3 Years
Doximitys revolutionary business model creates a compelling competitive advantage for the company.
Multiple waves of digitization have attempted to nudge the healthcare industry forward over the past decades. However, it still largely remains stuck in its old ways. Doximity (NYSE: DOCS), an evolving medical network, is approaching the modernization of healthcare in its own unique ways and showing early success. Here are three reasons why investing in Doximity can turn out to be highly lucrative for long-term investors.
A one-of-a-kind approach
Many refer to Doximity as the 'LinkedIn for medical professionals.' That comparison isn't entirely flawed -- 80% of the doctors, 50% of the nurse practitioners, and 50% of physician assistants in the U.S. are verified members of Doximity's app -- but it falls short of fully appreciating the savviness behind Doximity's business model.
Doximity founded itself on the premise that about 73% of healthcare spending is decided by the doctors, and creating an online forum for doctors would also entice pharmaceutical companies, medical device makers, and other healthcare companies as they look to market their offerings.
Image source: Getty Images.
Doctors and health professionals are excited to join Doxmity's free app because it allows them to connect and share information, review medical studies, collaborate across multiple hospitals, and coordinate patient care. Doximity also offers important services such as digital eSignature and faxing, virtual healthcare, and recruitment.
While hospitals and pharma companies have to pay a subscription fee, that is not stopping them from joining Doximity's platform as they get a large, established audience of doctors to whom they can present their products and services. The top 20 hospitals and pharma companies in the U.S. are now Doximity's subscribers. Overall, Doximity's platform creates a win-win formula for all its key constituents.
There is no other platform quite like Doximity. Its unique approach to making healthcare interactions more efficient creates a major competitive advantage for the company.
Showing early promise
According to independent studies, pharmaceutical companies and other healthcare system providers see over 10 times the return on their investments when using Doximity's platform. It is no surprise that Doximity grew its number of corporate customers with revenue over $100,000 from 172 at the end of December 2020 to 258 at the end of December 2021, a jump of over 50%.
Corporate customers seem to love Doximity's platform and are spending more on it. At the end of December 2021, Doximity's net dollar retention rate -- how much more the average existing client spends from one year to the next -- was an astounding 171%, up almost 18% from an already impressive 145% a year ago.
With such strong momentum behind its business, Doximity expects to end its fiscal 2022, ended March 31, with $339 million in sales, a jump of about 64% over fiscal 2021 -- and representing average annual growth of 58% over the past three years. And unlike many of the early-stage, fast-growing companies, Doximity has been profitable in each of its three reported quarters since going public in June 2021, a testament to its scalable business model.
Finally, Doximity is just getting started. The company estimates its market opportunity at $18.5 billion and so it has a long runway ahead.
It's still early days, but a big opportunity awaits
One thing for investors to note is that Doximity hasn't yet disclosed the level of engagement of the doctors on the platform -- how often they use and spend time on the platform. Doctors are the backbone of Doximity's business model, and their engagement is a critical leading indicator of the value the company is creating and the sustainability of its growth.
Also, despite a pullback of over 60% from their all-time high in September 2021, Doximity's shares are still trading at a rich price-to-sales valuation of about 28.
DOCS PS Ratio data by YCharts.
Doximity's revolutionary business model, producing high returns of investments for its customers and generating rapid and profitable growth for the company, along with the large opportunity ahead of it justifies the premium the market demands. The company's ability to establish further dominance will become clearer over the next three years or so. However, all signs indicate that taking a small position in this unique and promising business will likely reward patient investors splendidly in the long run.