The digital signature market is thriving owing to the rising adoption of digitally enabled signatures in the work process of various organizations to meet their need for secured online transactions. Moreover, digital signatures have the edge of being faster, more efficient, easily stored, and secure over conventional paper-based signature systems, resulting in improved operational efficiency.

According to a study by Fortune Business Highlights, the global digital signature market is forecasted to reach $118.88 billion by 2032, growing at an impressive CAGR of 41%. This growth can also be attributed to the increasing popularity of SaaS-based actions that are rivaling the conventional analog processes.

Amid this growth, DocuSign, Inc. (DOCU) stands out as the premier option for secure digital signatures among various multinational businesses. DOCU’s shares have surged 27.2% over the past three months and 63.4% over the past six months, closing the last trading session at $91.34.

Now, let us dive deeper into the factors that could shape DOCU’s performance in the near future.

Recent Developments

On November 20, 2024, DOCU unveiled Docusign for Developers, a powerful suite of tools and resources designed for developers, partners, and entrepreneurs to revolutionize agreement management.

The product offers businesses the ability to integrate, extend, and scale solutions on the Docusign Intelligent Agreement Management (IAM) and expects to drive the growth of businesses and DOCU alike.

Sound Financials

For the fiscal 2025 third quarter that ended October 31, 2024, DOCU’s total revenue increased 7.8% year-over-year to $754.82 million. Its non-GAAP income from operations rose 19% from the year-ago value to $223.08 million.

Additionally, the company’s non-GAAP net income and non-GAAP net income per share grew 15.1% and 13.9% from the prior year’s quarter to $188.50 million and $0.90, respectively. As of October 31, 2024, DOCU’s total assets amounted to $3.77 billion, compared to $2.97 billion on January 31, 2024.

Optimistic Analyst Estimates

Analysts expect DOCU’s revenue and EPS for the fiscal 2025 fourth quarter (ending in January) to increase 6.8% and 11.1% year-over-year to $760.94 and $0.84, respectively. In addition, the company exceeded the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.

Looking at the full fiscal year ending January 2025, DOCU’s revenue and EPS are expected to rise 7.2% and 18.6% from the prior year to $2.96 billion and $3.53, respectively.

High Profitability

DOCU’s trailing-12-month gross profit margin of 80.16% is 58.5% higher than the industry average of 50.56%. Its trailing-12-month EBIT margin stands at 6.17%, 19.1% higher than the industry average of 5.18%.

In addition, the company boasts a trailing-12-month net income margin of 34.73%, which is 804.1% higher than the sector average of 3.84%. Also, the stock’s trailing-12-month levered FCF margin of 38.94% is 234.2% higher than the industry average of 11.65%.

Discounted Valuation

DOCU is currently trading at a forward non-GAAP PEG of 0.92x, which is 51.4% lower than the industry average of 1.90x. Moreover, the stock’s forward EV/EBIT multiple stands at 20.16, 11.4% lower than the industry average of 22.75x.

Additionally, it has a forward Price/Cash Flow multiple of 20.01, which is 9.5% lower than the industry average of 22.11x. This indicates that DOCU is undervalued compared to the broader market, offering potential upside for investors.

POWR Ratings Reflects Optimism

DOCU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

DOCU has an A grade for Quality, supported by profitability measures that exceeded industry benchmarks. Moreover, it earned a B grade for Value, driven by its discounted valuation metrics relative to the industry average.

Within the A-rated Software – SAAS industry, DOCU is ranked #3 out of 18 stocks. Beyond what is stated above, we have also given DOCU grades for Sentiment, Momentum, Stability, and Growth. Get all DOCU ratings here.

Bottom Line

DOCU has established a monopoly in the increasingly popular digital signature market, driven by its various SaaS offerings that enhance organizational efficiency. As organizations worldwide switch over to digitally signing documents, the company’s growth appears to be solid.

Given DOCU’s impressive analyst estimates, high profitability, and attractive valuation now could be the ideal time to consider adding the stock to one’s portfolio.

How Does DocuSign, Inc. (DOCU) Stack Up Against Its Peers?

Although DOCU’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Software – SAAS industry:

Vimeo Inc. (VMEO)

Kaltura, Inc. (KLTR)

WM Technology, Inc. (MAPS)

To explore more A or B-rated Software – SAAS stocks, click here.

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DOCU shares were trading at $91.34 per share on Wednesday morning, down $0.02 (-0.02%). Year-to-date, DOCU has gained 1.56%, versus a 3.52% rise in the benchmark S&P 500 index during the same period.

About the Author: Aritra_Gangopadhyay

Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success. More...

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