DocuSign stock price has done well in the past 12 months, even as the company has faced substantial challenges following the COVID-19 boom. DOCU shares have jumped by 70% in this period, giving it a market capitalization of over $18.5 billion. This article explains what to expect ahead of earnings.
DocuSign earnings growth
DocuSign is a top software company that offers solutions for signing, which are used by thousands of companies globally. Its business boomed during the COVID pandemic as more companies embraced remote work.
DocuSign is used mostly by sales executives, customer service, procurement, and human resource departments.
The pandemic growth trajectory has cooled since then, but the company continues to add customers. It has also invested in artificial intelligence solutions that have helped it boost its growth.
On this, the company launched and expanded the Intelligent Agreement Management (IAM) platform that helps different parts of an organization in their agreements. It has over 900 integrations and tools to collect user data.
In addition to the adjustment past the pandemic, the company has faced a major challenge because of competition. Most SaaS companies like Box, DocuSign, Salesforce, Adobe, Google, and Microsoft have launched their e-signature solutions.
Data compiled by SeekingAlpha shows that DocuSign’s annual revenue has jumped from $1.45 billion in 2021 to over $2.9 billion last year.
The most recent results showed that its revenue rose by 9% to $776 million in the fourth quarter, while its billings rose by 11% to $923 million.
Ita also grew its margins, with the gross figure rising by 200 basis points to 79.4%. Margins grew partly because of the 6% layoffs that the management implemented in 2024.
Read more: DocuSign stock price forecast: could explode higher after earnings
DOCU earnings and valuation
The next important catalyst for the DocuSign stock price will be its financial results that comes out on Thursday. Analysts anticipate the results to show that the company’s business slowed in the first quarter.
The average estimate is that its revenue rose by 5.54% in the first quarter to $748 million. They also expect the company’s second-quarter revenue to come in at $775 million, up by 5.37% from a year earlier, and the annual figure will be $3.14 billion followed by $3.36 billion next year.
A key concern among investors is that the company is a bit overvalued as its business slows. Data shows that the company has a trailing twelve-month (TTM) price-to-earnings ratio of 18 and a forward metric of 25.
SaaS companies are often valued using the rule of 40, which compares their growth and margins. DocuSign has a TTM growth of 7.78% and a net income margin of 35%, giving it a rule of 40 metric of 42, meaning that it is a cheap company.
DocuSign stock price analysis
The daily chart shows that the DOCU share price has bounced back in the past few days, moving from a low of $67.6 in April to $91 today. It has already moved above the 50-day and 200-day Exponential Moving Averages (EMA), a sign that bulls are in control.
The stock has also formed an inverse head and shoulders pattern, a popular bullish reversal sign. Also, the Average Directional Index (ADX) has tilted upwards, showing that it has the momentum.
Therefore, the most likely scenario is where the stock rises after earnings as bulls target the year-to-date high of $107.80. A drop below the 200-day EMA will invalidate the bullish outlook and point to more downside, potentially to $67, the lowest point in April.
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