Subdued Growth No Barrier To DocGo Inc. (NASDAQ:DCGO) With Shares Advancing 33%

DocGo Inc. (NASDAQ:DCGO) shareholders have had their patience rewarded with a 33% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 44%.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about DocGo's P/E ratio of 17.9x, since the median price-to-earnings (or "P/E") ratio in the United States is also close to 19x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

DocGo certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is moderate because investors think this strong earnings performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Check out our latest analysis for DocGo

If you'd like to see what analysts are forecasting going forward, you should check out our free report on DocGo.

Is There Some Growth For DocGo?

In order to justify its P/E ratio, DocGo would need to produce growth that's similar to the market.

If we review the last year of earnings growth, the company posted a terrific increase of 320%. Still, EPS has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, EPS is anticipated to slump, contracting by 62% during the coming year according to the seven analysts following the company. With the market predicted to deliver 15% growth , that's a disappointing outcome.

With this information, we find it concerning that DocGo is trading at a fairly similar P/E to the market. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining earnings are likely to weigh on the share price eventually.

What We Can Learn From DocGo's P/E?

DocGo's stock has a lot of momentum behind it lately, which has brought its P/E level with the market. While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

We've established that DocGo currently trades on a higher than expected P/E for a company whose earnings are forecast to decline. Right now we are uncomfortable with the P/E as the predicted future earnings are unlikely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for DocGo (1 is concerning) you should be aware of.

If you're unsure about the strength of DocGo's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.