Docusign, Inc. DOCU has had an impressive run in the past six months. Its shares have gained 67%, outperforming the 11% rally of the internet software industry and the 6.4% growth of the Zacks S&P 500 composite.

DOCU has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get the true sense of the quality and sustainability of its growth.

The company’s earnings for fiscal 2025 and 2026 are expected to improve by 18.5% and 4.3%, respectively, year over year. DOCU has a long-term (three to five years) expected earnings growth rate of 9.4%.

Factors That May Benefit DOCU Stock

Docusign’s revenue growth has been significantly driven by sustained customer demand for its eSignature solution within a vast addressable market. The company’s customer base has expanded consistently, reaching 1.1 million in 2022, 1.3 million in 2023 and 1.5 million in 2024. This upward trajectory suggests continued growth in the years ahead. Despite the increasing demand, the eSignature market remains largely underpenetrated, offering Docusign substantial opportunities to extend its eSignature services globally, thereby enhancing revenue potential.

Approximately 97% of Docusign’s total revenue is derived from subscription fees. These subscriptions include access to the company’s products and customer support and typically span durations of one to three years. The subscription model provides software developers with stable revenue streams and greater visibility into cash flows. Additionally, it makes high-cost software solutions more accessible and affordable for resource-constrained businesses, thereby broadening the addressable market.

Docusign’s strategic direct and indirect go-to-market efforts have contributed to growth among both commercial and enterprise customers. Enhanced customer programs, innovative initiatives, and diversified use cases have consistently driven subscription revenue growth. In fiscal 2024, subscription revenues increased 10%, driven by expanded revenues from existing customers and the addition of new clients.

Moreover, Docusign has strengthened partnerships with technology leaders like Salesforce CRM and Microsoft MSFT. For instance, it has expanded its global strategic alliance with Salesforce to develop solutions that automate contract creation and improve collaboration for Salesforce’s Slack users. Additionally, Docusign integrated its eSignature capabilities with Microsoft Teams last year and now serves as the official electronic signature provider in Microsoft Teams’ Approvals app. These partnerships allow Docusign to access a significantly larger customer base than it could independently.

Concerns for DOCU Shares

Docusign has never declared dividends and currently does not have any payout plan. So, the only way to achieve a return on investment on the company’s stock is through share price appreciation, which is not guaranteed. Investors seeking cash dividends should avoid buying Docusign’s shares.

DOCU’s current ratio, a key measure of liquidity, stood at 0.84 at the close of the second quarter of fiscal 2025. This figure marks a decline from 0.93 in the preceding quarter, 0.88 in the same period last year, and is below the industry average. A current ratio below 1 signals potential challenges in meeting short-term obligations, raising concerns about the company’s financial flexibility. For Docusign, this indicates a need to carefully manage its working capital to ensure liquidity, as its ability to cover immediate liabilities could impact its operational stability and investor confidence.

DOCU Stock's Zacks Rank

Docusign currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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