r/investing Apr 30, 04:38 PM
$724M in net cash. 89.75% gross margins. 23.59% ROIC. Trades at $4.3B. TL;DR: Doximity (DOCS) is a digital platform used by 80% of U.S. physicians for collaboration, telehealth, and medical news. They make money by charging pharma companies for targeted marketing access. The stock sold off because pharma clients delayed ad budgets due to regulatory uncertainty around drug pricing (MFN deals). Wall Street panicked, but the fundamentals remain pristine: 89.75% gross margins, 23.59% ROIC, $724M in net cash, and management just authorized a $500M buyback program. Trading at $24 vs. intrinsic value of $28.44 (15.6% margin of safety). I think the market is overreacting to temporary headwinds.
the business
DOCS built the digital town square for American doctors. 80% of all U.S. physicians use it to collaborate with colleagues, manage telehealth visits, read medical research, and handle their on-call schedules. The doctors don't pay anything. Instead, Doximity charges pharmaceutical companies and health systems for targeted digital marketing and workflow tools.
What caught my attention is the recurring revenue model. 95% of their revenue is subscription-based, and once a pharma client integrates Doximity into their annual budget, they tend to stay and spend more. Net Revenue Retention is 112%, which jumps to 117% for their top 20 customers.
the numbers
Operating Cash Flow $315.42M
Stock-Based Compensation -$102.95M
Working Capital Change $31.51M
Maintenance CapEx (5yr avg) -$9.12M
WC Reinvest -$3.48M
Owner Earnings $231.38M
Shares Outstanding (Diluted) 188.88M
Owner Earnings Per Share $1.23
I use a 5-year smoothed CapEx figure because their maintenance spending is lumpy year to year. Over the last five years, CapEx averaged 1.43% of revenue. This is an incredibly asset-light business.
Quality metrics: - ROIC: 23.59% - 5-year Owner Earnings CAGR: 54.40% - Gross Margin: 89.75% - Operating Margin: 38.46% - Recurring Revenue: ~95%
the balance sheet
They have $735.13M in liquid assets and only $10.69M in debt. Net cash sits at $724.44M, or $3.84 per share. The enterprise value is $3.55B, which gives you an EV-to-Owner-Earnings multiple of 15.3x.
why it's cheap
The market sold off hard because revenue guidance dropped from 20% growth to roughly 10%. The reason: 16 of their top 20 pharma clients delayed their annual ad budgets late in the year while waiting for the White House to finalize Most Favored Nation drug pricing deals. Wall Street hates uncertainty, so the stock tanked.
Adding to the noise, CFO Anna Bryson resigned in mid-April 2026 while on medical leave. Truist and Evercore downgraded the stock citing "reduced visibility" in pharma ad spending.
why I think the market is wrong
January 2026 pharma bookings hit record highs. Management said on the Q3 call this is a timing issue, not a structural loss of clients. They expect to exit the calendar year as a double-digit grower once the frozen budgets thaw.
More importantly, if the moat was eroding, you'd see margins compress. I