Doximity has been on fire lately. In the past six months alone, the company’s stock price has rocketed 86.8%, reaching $53.60 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy DOCS? Or is this a case of a company fueled by heightened investor enthusiasm? 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 Growth Boosts Cash On Hand

In addition to revenue, billings is a non-GAAP metric that sheds additional light on Doximity’s business quality. Billings 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 $127.7 million in the latest quarter, and over the last four quarters, its growth averaged 17.2% year-on-year increases. This performance was solid, indicating robust customer demand. The 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 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 5.6 months this quarter. The company’s performance indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Doximity the freedom to invest in new product initiatives while maintaining optionality.

One Reason to be Careful:

Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Doximity’s management team is currently guiding for a 12.7% year-on-year increase in sales next quarter. Looking further ahead, sell-side analysts expect Doximity’s revenue to grow 4.5% over the next 12 months, a deceleration versus its 23% annualized growth rate for the last three years. This projection doesn't excite us and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

Final Judgment

Doximity’s positive characteristics outweigh the negatives, and after the recent surge, the stock trades at 19.9x forward price-to-sales (or $53.60 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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