Is Doximity, Inc. (NYSE:DOCS) Potentially Undervalued?

Doximity, Inc. (NYSE:DOCS), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$35.73 at one point, and dropping to the lows of US$19.86. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Doximity's current trading price of US$20.78 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Doximity’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Doximity

What's The Opportunity In Doximity?

Great news for investors – Doximity is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Doximity’s ratio of 34.05x is below its peer average of 48.81x, which indicates the stock is trading at a lower price compared to the Healthcare Services industry. However, given that Doximity’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Doximity?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 64% over the next couple of years, the future seems bright for Doximity. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since DOCS is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on DOCS for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DOCS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Doximity at this point in time. While conducting our analysis, we found that Doximity has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Doximity, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.