For years, companies from all industries have been investigating how artificial intelligence (AI) can make life easier – for themselves and for customers. And in many cases, these companies have already introduced AI into their business.
Recently, a high-growth healthcare company mentioned a new tool it’s testing. I’m talking about Doximity (DOCS -6.01%) and its AI writing aid for doctors. Today, more than 80% of US doctors use Doximity. Could this new AI tool secure Doximity’s market leadership — and eventually boost the stock? let’s find out
social media and more
First a bit of background knowledge about Doximity. The company offers doctors a platform on which they can network with each other like in social media – but with a lot of medicine-specific bells and whistles. Physicians can transfer medical records, receive research studies directly related to their area of interest, and conduct virtual visits right from their phone. It’s like an extension of their practice.
How much do doctors pay for all this? Zero. Doximity generates revenue from pharmaceutical companies and hospital systems. They advertise on the platform to reach doctors – for example, a pharmaceutical company wants to inform doctors about its latest medicines.
And with so many doctors — and nurses, medical students, and physician assistants — using Doximity, pharmaceutical companies and hospitals are flocking to the platform to connect with them. In fact, Doximity’s customers include the top 20 pharmaceutical companies and the top 20 hospital systems.
As a result, Doximity’s earnings growth has skyrocketed. In its most recent quarter, total revenue, operating cash flow, and free cash flow each increased at double-digit rates. Adjusted EBITDA also posted big gains in the quarter, rising 18% to over $55 million. And the income has also increased over time.
DOCS Sales Data (Annual) by YCharts
AI does the writing
Now let’s look at Doximity’s new AI effort. The company has created a beta site called DocsGPT. Like the chatbot ChatGPT, it’s all about saving time by letting the AI write something. According to Doximity, a doctor raved about DocsGPT after writing a letter of complaint to an insurer regarding a patient – and within an hour, the insurer approved a more appropriate drug.
At the moment, Doximity calls DocsGPT “a small test project”. However, the company hopes that this will only be the beginning of using AI to make doctors’ jobs easier.
Jeffrey Tangney, Doximity’s Chief Executive Officer, mentioned during the last conference call that there are many ways to eventually monetize a DocsGPT product. It is clear that such a product could save doctors time. As Doximity notes, more than 75% of healthcare documents in the US are sent by fax or regular mail. The company could eventually help transform the way those documents change hands — and save doctors a lot of time.
So, could advances in AI boost Doximity stock? Alone, no. But coupled with the company’s strong track record and ability to keep doctors and advertisers coming back, strengths in AI could help launch this stock.
A reasonable price
What does that mean for you as an investor? Right now is a great time to get into Doximity. It’s trading at 44 times forward earnings estimates, down from more than 75 a year ago. Given the company’s earnings growth and customer list, that’s reasonable.
Doximity shares took off after the 2021 IPO. But since then, they’ve fallen, disappointing investors and potential investors. However, this trend is rather short-term. Over time, Doximity’s earnings growth, new products — including those powered by AI — and gains in members and customers should propel shares of this innovative company higher.
Adria Cimino does not hold any of the shares mentioned. The Motley Fool has positions in and recommends Doximity. The Motley Fool has a disclosure policy.
