What a brutal six months it’s been for Doximity. The stock has dropped 48.2% and now trades at $21.15, rattling many shareholders. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Given the weaker price action, is now the time to buy DOCS? Find out in our full research report, it’s free.

Why Does DOCS Stock 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 Things to Like:

1. Long-Term Revenue Growth Shows Strong Momentum

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Doximity’s sales grew at a solid 25.5% compounded annual growth rate over the last five years. 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 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 6.5 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 $185.3 million in Q1, and over the last four quarters, its year-on-year growth averaged 9.7%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers.

Final Judgment

Doximity has huge potential even though it has some open questions. With the recent decline, the stock trades at 6.3× forward price-to-sales (or $21.15 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.

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