New Products And Integrated Programs Will Improve Future Prospects

Key Takeaways

• Doximity's new products and integrated programs drive significant revenue growth and enhance marketing strategies and client retention.
  
• Strong professional engagement and partnerships suggest potential for sustained, high-margin revenue growth and improved profitability.
  
• Doximity's reliance on share gains and concentrated revenue sources raises concerns about sustaining growth amid competitive pressures and potential client relationship volatility.

Catalysts

Operates a cloud-based digital platform for medical professionals in the United States.

• Doximity's introduction of new products, such as point-of-care and formulary modules, has shown over 100% growth, representing entirely new revenue streams, which could significantly increase future revenues.
  
• The company's focus on integrated programs allows for customized, dynamic marketing strategies for each physician, which could lead to larger program sizes and increased revenues.
  
• The client portal offers seamless integration of data and insights, providing clients with real-time ROI analysis and potentially driving higher retention and upsell rates, thereby enhancing future revenue growth.
  
• Accelerated launches of integrated programs, starting earlier in the fiscal year, could stabilize and enhance quarterly revenue recognition, leading to smoother earnings growth.
  
• Continued strong engagement with healthcare professionals and expanded partnerships with health systems indicate potential for sustained high-margin revenue growth, bolstering both net margins and overall profitability.

Doximity Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Doximity's revenue will grow by 12.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 36.6% today to 39.7% in 3 years time.
• Analysts expect earnings to reach $310.8 million (and earnings per share of $1.47) by about April 2028, up from $201.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 56.6x on those 2028 earnings, up from 49.2x today. This future PE is greater than the current PE for the US Healthcare Services industry at 50.7x.
• Analysts expect the number of shares outstanding to grow by 1.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.43%, as per the Simply Wall St company report.

Doximity Future Earnings Per Share Growth

Risks

• Doximity's strong performance may not be sustainable, as current revenue growth has significantly outpaced market expectations, largely driven by share gains rather than underlying market growth. This could impact long-term revenue steady growth if market growth stays stagnant.
  
• While the pharma digital market experienced unexpected growth, driven by Doximity’s share gains, it remains uncertain if this level of acceleration can be maintained or if the company will revert to historical growth rates, potentially affecting future revenue targets.
  
• The reliance on integrated multi-module programs for increased launch speed and larger deal sizes also implies that a significant portion of revenue is recognized earlier than in previous years, creating tougher revenue growth comparisons in future periods.
  
• The company acknowledges that the current level of competitive advantage might not be replicable in subsequent years if competitive pressures change or if competitors improve their offerings, potentially impacting Doximity’s revenue and market share growth pace.
  
• A significant concentration of revenue from leading pharmaceutical companies, with top clients accounting for a large portion of total revenues, poses a risk of revenue volatility should relationships sour or contracts not renew at expected levels.

Valuation

• The analysts have a consensus price target of $73.176 for Doximity based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $90.0, and the most bearish reporting a price target of just $55.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $783.1 million, earnings will come to $310.8 million, and it would be trading on a PE ratio of 56.6x, assuming you use a discount rate of 7.4%.
• Given the current share price of $52.78, the analyst price target of $73.18 is 27.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.