2 battered growth stocks you can buy with confidence right now

A difficult year for investors holding many innovative growth stocks only gets more complicated. The Nasdaq Compound The index, which contains heaps of growth stocks, is down 33% in 2022 and there could be more pain ahead.

On November 2, the Federal Reserve raised the primary credit rate to 4%, from almost nothing at the start of the year. With capital much harder to come by, high-growth-stage capital-hungry companies could stagnate.

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Almost all growth stocks are in free fall, but the companies behind them are hardly identical. The health-related businesses underlying these two stocks are already profitable enough to continue to grow without relying on increasingly costly capital injections. Here’s why they look smart shares to buy now.

Doximity

Doximity (DOCS -3.68%) operates a digital platform for US healthcare professionals under the same name. At the heart of Doximity’s operations is a social media site that has 80% American doctors among its members.

Doximity members cannot upload their own posts for the purpose of gaining notoriety. Instead, it appeals to clinicians with tools that make their lives easier. For example, Doximity Dialer allows physicians to contact patients using their personal devices. The dialer hides doctors’ private information to make it look like they are calling from a desk phone.

Most productivity tools for doctors are actually designed for their employers. Doctors used Dialer approximately 200,000 times a day in October because Dialer was designed with their needs in mind.

Doximity’s productivity tools are so popular with physicians that hospitals and healthcare systems are eager to pay subscription fees so their employees can access its premium features. Third-quarter revenue grew 25% year-over-year to $91 million, and much of that high-margin revenue hit net income. Free movement of capital jumped 31% year over year to $43 million.

Doximity’s stock price has fallen, but expectations are still relatively high. The stock is trading at around 36 times forward earnings estimates. With a captive audience of American doctors and a suite of tools to keep them engaged, growing into that lofty valuation probably won’t be a problem.

InMode

Shares of InMode (INMD -0.57%) skyrocketed in 2021, but the stock is down around 53% this year. This is a bit surprising as its position in the growing aesthetics market is stronger than ever.

InMode develops and markets proprietary technology for non-invasive body shaping, fat reduction and skin tightening. For example, Morpheus8 is a radio frequency powered device that can reshape fatty tissue in ways that tighten jaws and eliminate wrinkles.

A workstation containing Morpheus8 and several related devices is pretty much all a doctor needs to run a successful spa these days, so demand is very high. Third quarter revenue was up 29% year over year. At just $121.2 million, however, this company still has plenty of room to grow.

Strong intellectual property means InMode is the only company to market radio frequency powered skin contouring devices. This gives the company such pricing power that it was able to post a staggering 85% gross margin in the third quarter. On a GAAP basisthe net income for the past year was equivalent to approximately 41% of turnover.

At recent prices, you can grab InMode for just 14.6 times this year’s adjusted earnings expectations. It’s an unbeatable bargain for an aesthetics business that could continue to grow by leaps and bounds for many years to come.

Cory Renauer has positions in Doximity, Inc. The Motley Fool has positions in and recommends Doximity, Inc. and InMode Ltd. The Motley Fool has a disclosure policy.

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