Shares of Docusign (DOCU 28.41%) surged around 28.7% on Friday, as of 1:13 p.m. ET.

The company released third-quarter earnings last night, beating analyst estimates and guiding for a stronger-than-expected full year. Meanwhile, underlying metrics also told a positive story.

Docusign shows signs of life

In the third quarter, Docusign had revenue growth of 8% to $754.8 million, and non-GAAP (adjusted) earnings per share of $0.90, with both figures handily beating analyst expectations. In addition, the company delivered strong guidance, most notably in terms of billings, which is a keen investor focus. Management projected billings rising to between $870 million to $880 million in Q4, accelerating from $752.3 million in the third quarter.

Billings takes into account all contract sales to new customers, plus renewals for existing customers within the contract period. So, many analysts tend to focus on that metric rather than revenue, which is recognized over time during the life of the contract.

Is Docusign a Buy?

Even though Docusign has tripled off its all-time lows, the stock also remains over 70% below its all-time high from 2021. So, there very well could be additional upside.

Yet while investors are quite enthused at the moment, shares now look pricey. Docusign's market cap is now $21.8 billion, or over 7 times this year's billings guidance. While that's not particularly overly expensive for a high-growth software name, Docusign is still growing at just a mid- to high-single-digit rate. Therefore, I'd be wary of chasing this big rally, but kudos to investors who believed in the turnaround story when new CEO Allan Thygesen took over in October 2022.