Not cheap, but worth a visit by TipRanks
© Reuters. DocuSign Stock: not cheap, but worth a look
DocuSign (NASDAQ 🙂 enables businesses to run their business faster with less risk and cost, while providing a more enjoyable experience for customers and employees.
The company does this by rebuilding the fundamental ingredient of doing business: agreement. Since agreements happen all the time in the normal course of business, companies sign contracts with other parties.
This applies to any organization, of any type and of any size. Therefore, the total addressable market for DocuSign is virtually unlimited.
The company has grown in revenue steadily over the past few years at a rapid pace, with the stock significantly outperforming the overall market.
While DocuSign certainly isn’t cheap, stocks could move away from their current levels as we move up. I am bullish on the stock. (See DocuSign stock charts on TipRanks)
The excellent growth rate continues
DocuSign’s most recent quarterly results presented another period of excellent growth, with the company increasing revenue by 50% to a new record revenue of $ 511.8 million.
The company’s non-GAAP adjusted earnings per share increased 176% year-over-year to $ 0.47, 17.5% above the consensus forecast of about $ 0.40.
While DocuSign’s year-over-year revenue growth edged down from 57.9% sequentially to around 50%, the second quarter of 2021 marked the fourth consecutive period in which the company achieved sales growth north of 50%.
For context, the company’s quarterly revenue growth hovered between 30% and 40% in fiscal 2018 and 2019. So we can easily conclude that the pandemic has accelerated the transformation towards digitalization, reinforcing the need for the product. electronic signature from DocuSign.
The growing revenues of DocuSign are also of great quality. Specifically, 96.3% of the company’s revenue is based on subscriptions. This should provide high visibility into medium-term cash flow and further improve the company’s gross margins from their already high levels of around 78%.
Penetration into underserved areas is expected to serve as a powerful catalyst for future DocuSign revenue growth. Although DocuSign offers its services in more than 180 countries, it has a direct presence only in Canada, Australia, United Kingdom, France, Germany, Japan, Brazil and Mexico, outside of United States.
Having an industry disruptor growing at such impressive rates with rich gross margins should instantly translate into a rich valuation multiple, and that is true of DocuSign.
The stock is trading at a futures P / S of 21.3, which is certainly not a cheap multiple. That said, the company has maintained its impressive rate of expansion for several years.
The Taking of Wall Street
When it comes to Wall Street, DocuSign has a strong buy consensus rating, based on 15 unanimous buys awarded in the past three months. At $ 340.29, DocuSign’s average price target implies upside potential of 32.2%.
Disclosure: At the time of publication, Nikolaos Sismanis does not have a position in any of the titles mentioned in this article.
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