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Key Takeaways

  • DocuSign experienced tremendous growth due to the work-at-home environment.
  • Financials have returned to normal but compared to the pandemic years, they look worse than they are.
  • DocuSign is positioning itself to be a long-term player in the software-as-a-service industry.

DocuSign stock exploded in growth and popularity during the pandemic as some investors thought we were entering a new state of normal. But as things returned to their pre-pandemic routine and investors realized life would not be changed entirely, DocuSign’s stock price began to fall.

Now there are questions about whether DocuSign is a growth stock. Let’s explore DocuSign to see if it is still a worthy investment.

DocuSign Stock News

DocuSign reported an increase in sales for the second quarter of the fiscal year 2023 (which ended July 31) despite seeing a loss in stock value that dropped close to 80% in the past year. The company maintains full-year guidance on its account receivables and payables despite a shaky time for software-as-a-service enterprises. The company’s overall revenue grew 22% (billings up 9%) and 1.28 million paying customers worldwide.

DocuSign stock began 2022 with a share price of $157 but started losing value soon after. As of September 20, the stock was trading at $55.54 per share—a steep discount from nine months earlier. Some of this is due to stock market conditions, as the market as a whole has struggled due to high inflation.

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But the drop is also a result of lower-than-expected earnings in the first quarter of the fiscal year 2023. Wall Street analysts predicted an earnings report of $0.46 per share, but the company reported adjusted earnings of $0.38 per share. This resulted in a 24% stock price loss in June 2022.

The stock bounced back slightly after the news about the increase in earnings for the second quarter of the fiscal year 2022. However, questions remain as to whether or not the stock will see healthy gains in its value or stabilize. Historically, DocuSign has had a somewhat volatile performance. It is prone to swings in gains and losses as well as investor confidence in its ability to deliver a valuable service in electronic documents and signatures.

Income Statement

DocuSign had an income of $622 million for the second quarter of the fiscal year 2023, an increase from $512 million for the same quarter in 2022. Its earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter of the fiscal year 2023 was $128 million, an increase of over $114 million from the same period in the prior year. DocuSign’s operating profit in the second quarter of the fiscal year 2023 was $112 million. However, the company expects operating profit to be lower for the remaining two quarters of the fiscal year 2023 at $108 million for the third quarter and $105 million for the fourth quarter.

The operating margin for the first quarter of the fiscal year 2023 was -$25.5 million and -$41.7 million for the second quarter of the fiscal year 2023. However, the company expects improvements through the rest of the fiscal year 2023. They are currently forecasting their operating margin to be -$7.32 million for the third quarter of 2023 and -$12.3 million for the fourth quarter of 2023.

Net income for the second quarter of the 2023 fiscal year was -$45.1 million—a steep decline from the -$2.25 million reported in the second quarter of the fiscal year 2022.

Balance Sheet

As of January 31, 2022, DocuSign had total assets of $2.54 million and reported $1.32 million in assets as of the second quarter of the fiscal year 2023. The breakdown of its balance sheets includes:

  • Cash on hand at $802 million
  • Receivables of $453 million
  • Current liabilities of $1.37 million
  • Non-current liabilities of $894 million

Its total market capitalization as of January 31, 2022, was $993,990, and its common stock equity was $275 million.

Its working capital is -$52,043, and invested capital totaled $993,990 at the beginning of the fiscal year 2022. DocuSign has a tangible book value of -$178 million, total debt of $882 million, and 197,841 million shares outstanding.

Is DocuSign a Growth Stock?

DocuSign stock has the potential to grow over the long term because the company is taking steps to expand its services beyond the e-signature arena. As it currently stands, all court systems across the U.S accept the company’s core product of electronic signatures. This puts it at the level of Adobe’s PDF file format as a universal standard for ensuring the integrity and legitimacy of legal documents. However, competition is on the rise for this type of service. DocuSign is looking to stay one step ahead by introducing document-creating services known as Agreement Cloud and Insight.

DocuSign has done an excellent job of creating a niche in the electronic legal document industry. It’s a stock worth considering, especially if you’re looking for something to keep in your portfolio for the long term. The legal industry around the world trusts DocuSign and its products, and the industry will always require secure methods of signing and submitting electronic documents. DocuSign has shown it can be innovative and agile in creating electronic signature and document products for mobile and desktop applications, which helps foster growth in its profits and stock value.

Bottom Line

DocuSign shareholders have been on a wild ride of late. The need for DocuSign’s services grew tremendously thanks to lockdowns and the explosion of work-from-home adjustments due to the pandemic—so much so that some analysts overestimated the future growth for the stock.

As lockdowns have eased and people continue to return to offices, the demand for DocuSign’s services has slowed — this doesn’t mean the demand will disappear completely. DocuSign continues to work hard to ensure that 2020 and 2021 were not abnormalities. Shareholders should consider investing in this growth stock, but they should also understand that the ride will still be volatile for the near term.

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