1 Stock growth down almost 40% to buy and hold for 10 years
The past three years have been a roller coaster ride for investors, and such increased volatility can sometimes make it difficult to focus on the long term. But this is exactly the right move. If history is any indication, stock markets will rise substantially from their current levels in a decade. All investors have to do to make money is to buy stocks of excellent companies and be patient.
On that note, let's look at one stock whose prospects over the next 10 years look attractive: Doximity. Here are three reasons why investing in this healthcare networking platform is a good idea, even though its stock is down nearly 40% over the past year.
High Margin Doximity Store
Doximity operates a platform that allows doctors and others in the medical field to connect, find new job opportunities, catch up on the latest research, call patients for telemedicine visits and much more. The company makes money primarily by charging subscription fees to drug companies and hospitals that advertise their products and job opportunities on its platform.
Doximity's subscription-based online model results in incredibly high margins. In its most recent reporting period, the first quarter of fiscal 2024, ended June 30, Doximity reported a GAAP gross margin of nearly 88% and a net profit margin of 26.2%. In both cases, these metrics improved slightly compared to a year ago. It's hard to say what an objectively good profit margin is.
This depends on factors such as industry, business size, etc. But the vast majority of companies in the market would be happy to have gross margins close to 90%, and few can do that. Healthy margins matter, and Doximity's high-margin model is a critical reason for long-term investors to consider the stock.
Having a certificate is essential for all businesses to stand the test of time. There are different ways to do this, one of them is to create a network effect. This is when the value of a service increases with use. This gives Doximity a solid competitive advantage. Imagine you are a doctor trying to connect with other doctors.
It only makes sense to opt for a platform that many of your peers already use. Doximity estimates that more than 80% and 90% of US physicians and graduating medical students (respectively) use its platform. But the same logic works for pharmaceutical companies and hospitals, which value the ability to bid and promote their products directly to medical professionals.
The more doctors to advertise, the better. That's why the Doximity platform is used by the 20 largest pharmaceutical companies and the top 20 healthcare systems. In the long run, the network effect that Doximity has created should allow it to retain most of its users while attracting new ones. The company's retention rate for its subscription services routinely exceeds 100%.
It was 118% during the most recent quarter, although that was down from the 139% reported in the year-ago period. Still, Doximity's high retention rate makes sense, given the network effect of its platform. The company's ability to grow its business in this way should also help its revenue and earnings move in the right direction over the next decade.
The will will continue to grow. There is still a need for new treatment methods and new drugs. Also an aging world population. Doctors are responsible for a large portion of medical expenses, for example by issuing prescriptions to their patients. According to Doximity, physicians control more than 73% of healthcare spending.
That's why it's so important to be able to advertise directly to them the way drug manufacturers can on its platform. Doximity estimates the total addressable market at $18.5 billion, making its last 12-month period of nearly $437 million look like chump change. Doximity is losing favor among some investors due to its declining revenue growth rate. It also recently cut its lead in a move that upset the market and
But these are short-term matters. Doximity is still up against relatively low, tough comparisons to earlier pandemic years. It is also reducing its headcount by 10%, which should further boost its bottom line and already strong margins over time. And with its solid moat and exciting opportunities ahead, Doximity looks like a solid stock to hold its own for the next decade.
When our team of analysts has a stock tip, it can pay to listen. After all, the newsletter they've been running for over a decade, the Motley Fool Stock Advisor, has tripled the market. They've just revealed what they believe are the ten best stocks for investors to buy right now... and Doximity isn't one of them! That's right - they think they're even better buys.
In the dynamic world of investing, opportunities often arise when market sentiment overshadows a stock's true potential. One such opportunity presents itself as a growth stock that has recently seen a nearly 40% drop in value. While a short-term decline may seem alarming, savvy investors recognize the potential for substantial long-term gains. In this article, we dive into why this growth stock is ripe for a buy-and-hold strategy over the next decade.
Understanding Market Fluctuations:
Before diving into the reasons to consider this growth stock, it's important to understand the context of the recent decline. Market volatility is a natural part of the investment environment, which is influenced by a variety of factors, including economic conditions, industry trends and investor sentiment. A substantial decline can often be a knee-jerk reaction to short-term problems, creating an ideal opportunity for patient investors.
Identifying a diamond in the rough:
Amidst the chaos of a market decline, identifying a potential diamond in the rough requires a keen eye. Research and analysis play a key role in spotting stocks with solid growth potential that may be temporarily undervalued. For our recommended growth stocks, diligent research reveals that underlying fundamentals remain strong, setting the stage for impressive long-term growth.
Strong market position: Despite the recent setback, this growth title maintains a leading position in its industry. Its products/services continue to address a pressing need in the market and ensure a steady stream of income even in challenging times.
Innovative Approach: Innovation is often the catalyst for sustained growth. This growth title boasts a history of consistently introducing pioneering solutions that keep it ahead of the competition. This record-breaking success positions the company for significant growth over the next decade.
Global expansion: Diversifying your revenue stream through expansion into new markets is a hallmark of successful growth stocks. The company's strategic expansion plan is expected to lead to revenue and profit growth, making it a compelling choice for long-term investors.
Durable Finances: Solid finances are the foundation of enduring companies. Despite recent share price declines, growth stocks maintain healthy balance sheets, minimizing concerns about their ability to withstand near-term challenges.
Buy and Hold Strategy:
The key to reaping substantial rewards from growth stocks lies in adopting a buy-and-hold strategy. By focusing on long-term potential rather than short-term price swings, investors can ride out volatility and benefit from the stock's true growth trajectory. Holding this growth stock for a decade gives it plenty of time to capitalize on its strategic initiatives and innovation-driven growth.
Risks and Considerations:
While the prospect of substantial profits is enticing, no investment comes without risks. Investors should be aware of market volatility, industry-specific issues and potential changes in consumer behavior that could affect the performance of growth stocks.
In the world of investing, a 40% drop in the value of growth stocks should be seen as an opportunity rather than a hindrance. Astute investors realize that short-term market fluctuations do not necessarily reflect a company's true potential.
Armed with a strong understanding of growth stock fundamentals and the foresight to take a long-term view, investors can position themselves to reap significant rewards over the next decade. Remember that success in the stock market often requires patience, research and a willingness to stick with promising investments through their growth journey.
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