Docusign, Inc. DOCU has witnessed a remarkable surge of 27.9% in its stock price over the last three months, outpacing the technology services industry growth of 7.3%. As of the recent trading session, DOCU’s stock closed at $71.78, nearing its 52-week high of $73.8. The stock is currently trading above its 50-day moving average, indicating a positive investor sentiment.
Given the upward trajectory of DOCU shares, investors may be considering whether it’s an opportune time to invest in the company. Let’s delve deeper to evaluate this possibility.
Docusign’s Growth Driven by Unprecedented Demand
Docusign’s robust financial performance is attributed to the sustained demand for eSignature services in a market with vast potential. The company’s customer base has steadily increased over the years, with figures reaching 1.1 million in fiscal 2022, 1.3 million in fiscal 2023, and 1.5 million in fiscal 2024. This growth trend indicates a promising outlook for the company in the foreseeable future. Despite the escalating demand, the eSignature market remains largely untapped, offering Docusign ample opportunities to broaden its services globally and enhance its revenue streams.
A significant portion of Docusign’s revenue, around 97%, is derived from subscription fees. This model ensures a steady income flow for the company and enhances revenue predictability while making its software solutions more accessible to businesses with limited resources. Additionally, DOCU’s strategic go-to-market initiatives have fueled growth among commercial and enterprise clients, with subscription revenues surging by 10% in fiscal 2024.
Noteworthy is Docusign’s success in expanding its international market presence, with international revenues accounting for a growing share of its total revenues in recent years. The company’s strategic efforts in countries like Canada, the U.K., and Australia have reaped rewards, with rising demand in various regions prompting intensified marketing campaigns.
Forging strong partnerships with industry giants like Salesforce CRM and Microsoft MSFT has been instrumental in Docusign’s market expansion. Collaborative endeavors with these tech titans have broadened the company’s reach and product integration capabilities, enabling it to tap into a larger client base.
DOCU’s Strong Returns on Capital
With a trailing 12-month Return on Equity (ROE) of 53.7%, significantly exceeding the industry average of 9.5%, Docusign exhibits efficient utilization of shareholder investments to drive earnings. Moreover, the company’s Return on Invested Capital (ROIC) of 12.9% outshines the industry average of 4.4%, reflecting prudent capital allocation.
Promising Growth Prospects
Analysts project a 15.8% upsurge in DOCU’s fiscal 2025 earnings, with further growth anticipated in fiscal 2026. Revenue estimates also indicate a positive trend, with sales expected to rise by 6.5% in fiscal 2025 and 6% in fiscal 2026. The optimistic outlook is underscored by seven upward revisions in fiscal 2025 earnings estimates in the last 60 days, indicating a favorable market sentiment.
With its impressive market performance and sustained growth trajectory, Docusign emerges as an attractive investment option. The company’s resilience in capturing a growing customer base through a subscription-based revenue model offers stability and revenue predictability. Leveraging partnerships with key industry players further enhances its product offerings and market penetration.
Undeniably, the combination of positive market sentiments, strategic collaborations, and untapped market potential positions Docusign as a compelling choice for investors seeking long-term growth opportunities in the digital domain.