Motion Acquisition Corp. (MOTN) stockholders have approved its business combination with mobile health services provider DocGo. The combined entity will begin trading on Nov. 8 under the ticker symbol “DCGO”. What’s the forecast for DocGo stock, and is it a good buy?
DocGo offers ambulance and other non-critical services in the U.K. and in about 28 U.S. states, including Texas, New York, and California.
The MOTN-DocGo merger details
DocGo closed its business combination with MOTN on Nov. 5. As part of its merger with MOTN, DocGo will receive about $158 million in net cash proceeds, including $125 million in PIPE (private investment in public equity) at $10 per share. The PIPE investors include Light Street Capital and Moore Strategic Ventures. About 60 percent of the SPAC’s public shares were redeemed. The merger was announced in Mar. 2021.
DocGo stock’s forecast
Currently, MOTN stock is being tracked by just one Wall Street analyst, who has given the stock a "buy" rating and price target of $16. According to The Fly, Northland analyst Michael Latimore said, “DocGo is the first company to create an on-demand mobile health service and it is replacing the antiquated medical transport model with a digital-first approach.” MOTN stock is now 2.5 percent above its IPO price of $10 per share, but 13.6 percent below its 52-week high.
Is DocGo stock undervalued?
MOTN has assigned DocGo a pro forma implied equity value of $1.1 billion and an EV (enterprise value) of $900 million. Based on this, its EV-to-2021 sales multiple is 3.5x, and its multiple for 2022 is 3.1x. In comparison, Accolade and Signify Health have next-12-month EV-to-sales multiples of 7.2x and 3.4x, respectively.
DocGo stock is a good long-term investment.
DocGo positions itself as a last-mile telehealth service provider through its Telehealth Plus offering. Under this offering, patients can access non-emergency medical services such as blood work and testing, vaccines, wound treatment, mobile imaging, and more from the comfort of their own homes. It provides tech-enabled medical transportation services, including real-time vehicle location and estimated arrival times. The company also provides on-site medical solutions at events.
DocGo was one of the leading private ambulance operators responding to the COVID-19 pandemic in New York State. The company has administered about 1 million vaccines and completed about 1.5 million tests through its arm known as Rapid Reliable Testing. DocGo’s clients include the UK’s National Health Service, the NFL, and dialysis specialist Fresenius Medical Care. Other companies that focus on telehealth, such as Teladoc Health and American Well, don’t send licensed care professionals to the patient's home.
DocGo has projected revenue of $260 million in 2021 and expects its revenue to rise 11.5 percent year-over-year to $290 million in 2022. It expects to turn adjusted-EBITDA-positive in 2021 and projects adjusted EBITDA of $44 million in 2022. The company believes that its U.S. total addressable market is worth $95 billion. Overall, DocGo looks like a good investment based on its strong growth outlook and attractive valuation.