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DocuSign (DOCU) Dips 12% in 6 Months: Is the Stock Worth Buying?
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DocuSign, Inc. (DOCU - Free Report) has been on a downward spiral lately with significant selling pressure. The stock has declined 12% in the past six months, a considerable drop compared to the 21.9% rally in the industry it belongs to and the 13.1% rise in the Zacks S&P 500 composite.
Looking beyond the six-month performance, DOCU’s stock has surged 5.6% over the past year, indicating that the current downturn may be part of a correction phase.
Six-Month Price Performance
Image Source: Zacks Investment Research
As of the last trading session, DOCU’s stock closed at $54.59, which is around 16% below its 52-week high of $64.76. Additionally, it is trading below its 50-day moving average, suggesting a bearish sentiment among investors.
Given the recent weakness in DOCU shares, investors might be tempted to buy the stock. But is this the right time to buy DOCU? Let’s find out.
Innovation, Operational and Financial Efficiency
eSignature, DocuSign’s anchor product, enables the virtual but secure signing and sending of agreements on a variety of devices from anywhere in the world. The company’s top line is significantly benefiting from continued customer demand for eSignature. Despite this rising demand, the market for eSignature remains largely untapped, and this keeps DocuSign in a position to expand eSignature across businesses around the world.
The company registered growth in both earnings and revenues in the first quarter of fiscal 2025. Non-GAAP earnings of 82 cents per share increased 14% year over year and total revenues of $710 million were up 7% year over year.
DocuSign has progressed significantly across the three pillars of the company’s strategic vision: accelerating product innovation, enhancing the reach and effectiveness of omnichannel go-to-market initiatives, and strengthening operational and financial efficiency. It is experiencing improved performance with customers managed by the direct sales force. The company has significantly increased its business with customers signing and renewing multiyear, multimillion-dollar contracts, including Fortune 500 global leaders in energy, insurance, industrials, consumer goods, and several federal and state government agencies.
In terms of product innovation, identity verification products like AI-enabled IDV Premier and the recently launched QES-compliant Identity Wallet are now in use by more than 1,000 customers in the U.K. The recently launched DocuSign monitor had 1,500 new accounts created in the fiscal fourth quarter.Regarding operational and financial efficiency, ongoing cost management initiatives are helping DocuSign streamline its operations and channel investments on initiatives that promise long-term growth.
DocuSign has deepened its relationships with partners such as Salesforce (CRM - Free Report) and Microsoft (MSFT - Free Report) . DOCU and Salesforce jointly develop solutions for the automation of the contract process and expansion of collaboration among organizations that use Salesforce’s Slack. DocuSign made an eSignature integration with Microsoft Teams last year and is currently an official electronic signature provider in Microsoft Teams’ Approvals app.
The recent acquisition of Lexion fortifies DocuSign's position in Intelligent Agreement Management (IAM) by adding more AI-assisted capabilities to its IAM platform. The integration will provide customers with richer insights and analysis, speeding up contract reviews and negotiations and simplifying information retrieval within documents.
Healthy Returns on Capital
Return on equity (ROE), an indicator of profitability, shows how efficiently a company uses its shareholders' investments to generate earnings. DOCU’s trailing 12-month ROE is 63.3% compared with the industry’s 6.1%.
Image Source: Zacks Investment Research
DocuSign has demonstrated effective investment in profitable areas, as reflected in its return on invested capital (ROIC). The company’s trailing 12-month ROIC is 10.4%, ahead of the industry average of 4.1%.
Image Source: Zacks Investment Research
Strong Top and Bottom-Line Prospects
The Zacks Consensus Estimate for DOCU’s fiscal 2025 earnings is pegged at $3.27, indicating 9.7% growth from the year-ago level. Earnings in fiscal 2026 are expected to increase 7.9% from the year-ago actuals. The company’s sales for fiscal 2025 are expected to increase 5.9% and 6.3% year over year, respectively, in fiscal 2025 and 2026.
Five estimates for fiscal 2025 moved north in the past 60 days versus three southward revisions, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for fiscal 2025 earnings has moved up 1% in the past 60 days.
Consider Waiting for a Better Entry Point
In conclusion, while DocuSign demonstrates robust growth prospects and strong financial health, the stock’s current correction phase suggests that waiting for a more advantageous entry point could yield better returns for investors. The company's product innovation, omnichannel go-to-market strategies, and efforts to enhance operational and financial efficiency highlight its potential for sustained growth, making it a compelling investment in the long term. However, potential investors should remain patient and watch for further adjustments in the stock price before making their move.
Image: Bigstock
DocuSign (DOCU) Dips 12% in 6 Months: Is the Stock Worth Buying?
DocuSign, Inc. (DOCU - Free Report) has been on a downward spiral lately with significant selling pressure. The stock has declined 12% in the past six months, a considerable drop compared to the 21.9% rally in the industry it belongs to and the 13.1% rise in the Zacks S&P 500 composite.
Looking beyond the six-month performance, DOCU’s stock has surged 5.6% over the past year, indicating that the current downturn may be part of a correction phase.
Six-Month Price Performance
As of the last trading session, DOCU’s stock closed at $54.59, which is around 16% below its 52-week high of $64.76. Additionally, it is trading below its 50-day moving average, suggesting a bearish sentiment among investors.
Given the recent weakness in DOCU shares, investors might be tempted to buy the stock. But is this the right time to buy DOCU? Let’s find out.
Innovation, Operational and Financial Efficiency
eSignature, DocuSign’s anchor product, enables the virtual but secure signing and sending of agreements on a variety of devices from anywhere in the world. The company’s top line is significantly benefiting from continued customer demand for eSignature. Despite this rising demand, the market for eSignature remains largely untapped, and this keeps DocuSign in a position to expand eSignature across businesses around the world.
The company registered growth in both earnings and revenues in the first quarter of fiscal 2025. Non-GAAP earnings of 82 cents per share increased 14% year over year and total revenues of $710 million were up 7% year over year.
DocuSign has progressed significantly across the three pillars of the company’s strategic vision: accelerating product innovation, enhancing the reach and effectiveness of omnichannel go-to-market initiatives, and strengthening operational and financial efficiency. It is experiencing improved performance with customers managed by the direct sales force. The company has significantly increased its business with customers signing and renewing multiyear, multimillion-dollar contracts, including Fortune 500 global leaders in energy, insurance, industrials, consumer goods, and several federal and state government agencies.
In terms of product innovation, identity verification products like AI-enabled IDV Premier and the recently launched QES-compliant Identity Wallet are now in use by more than 1,000 customers in the U.K. The recently launched DocuSign monitor had 1,500 new accounts created in the fiscal fourth quarter.Regarding operational and financial efficiency, ongoing cost management initiatives are helping DocuSign streamline its operations and channel investments on initiatives that promise long-term growth.
DocuSign has deepened its relationships with partners such as Salesforce (CRM - Free Report) and Microsoft (MSFT - Free Report) . DOCU and Salesforce jointly develop solutions for the automation of the contract process and expansion of collaboration among organizations that use Salesforce’s Slack. DocuSign made an eSignature integration with Microsoft Teams last year and is currently an official electronic signature provider in Microsoft Teams’ Approvals app.
The recent acquisition of Lexion fortifies DocuSign's position in Intelligent Agreement Management (IAM) by adding more AI-assisted capabilities to its IAM platform. The integration will provide customers with richer insights and analysis, speeding up contract reviews and negotiations and simplifying information retrieval within documents.
Healthy Returns on Capital
Return on equity (ROE), an indicator of profitability, shows how efficiently a company uses its shareholders' investments to generate earnings. DOCU’s trailing 12-month ROE is 63.3% compared with the industry’s 6.1%.
DocuSign has demonstrated effective investment in profitable areas, as reflected in its return on invested capital (ROIC). The company’s trailing 12-month ROIC is 10.4%, ahead of the industry average of 4.1%.
Strong Top and Bottom-Line Prospects
The Zacks Consensus Estimate for DOCU’s fiscal 2025 earnings is pegged at $3.27, indicating 9.7% growth from the year-ago level. Earnings in fiscal 2026 are expected to increase 7.9% from the year-ago actuals. The company’s sales for fiscal 2025 are expected to increase 5.9% and 6.3% year over year, respectively, in fiscal 2025 and 2026.
Five estimates for fiscal 2025 moved north in the past 60 days versus three southward revisions, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for fiscal 2025 earnings has moved up 1% in the past 60 days.
Consider Waiting for a Better Entry Point
In conclusion, while DocuSign demonstrates robust growth prospects and strong financial health, the stock’s current correction phase suggests that waiting for a more advantageous entry point could yield better returns for investors. The company's product innovation, omnichannel go-to-market strategies, and efforts to enhance operational and financial efficiency highlight its potential for sustained growth, making it a compelling investment in the long term. However, potential investors should remain patient and watch for further adjustments in the stock price before making their move.
DOCU currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.