DocuSign is a NASDAQ-listed company that enables businesses to run business more quickly with lower risks and lower costs. It also provides customers and employees with a pleasant experience.

This is achieved by rewriting the fundamental ingredient for conducting business, the agreement. Companies sign agreements with others because they know that business transactions are common.

This applies to any company, regardless of size or type. DocuSign has a virtually unlimited market.

Over the past several years, the company’s top line has grown at a steady pace. In fact, it outperformed the entire market.

DocuSign’s shares may not be cheap but the company could go higher as they advance. This stock has my full support. (See TipRanks DocuSign stock chart on TipRanks.

Excellent Growth Rate Continues

DocuSign reported another quarter of exceptional growth in its most recent quarterly results. The company grew revenues by half to $511.8million, a record high.

The company’s non-GAAP adjusted earnings per share grew 176% year-over-year to $0.47, 17.5% higher than the consensus forecast of approximately $0.40.

DocuSign’s sequential year-over-year revenue growth dipped slightly from 57.9% sequentially down to about 50%. Q2 2021, however, marked the fourth straight quarter in which DocuSign achieved sales growth of at least 50%.

To give you an idea of the context, quarterly revenue growth for DocuSign hovered around 30%-40% in FY 2018, and FY 2019. It is clear that DocuSign has seen a rise in digitalization due to the pandemic.

DocuSign’s increasing revenues are of high quality. Subscription-based revenue makes up 96.3%. This will allow the company to have great cash flow visibility over the long-term and increase the gross margins from the high 78% they already enjoy.

DocuSign should be able to penetrate underserved areas and drive its revenue growth. DocuSign provides its services to more than 180 countries. It does not have a presence outside the U.S. in Canada or Australia.

Valuation

DocuSign’s industry disruption growth rate of impressive levels with strong gross margins will immediately lead to an attractive valuation multiple.

Forward P/S is 21.3. This is not an inexpensive multiple. Despite this, the impressive growth rate of the company is maintained for many years.

Wall Street’s Take

DocuSign is a Strong Buy consensus rating based on 15 unanimous Buys over the past three-months. At $340.29, the average DocuSign price target implies 32.2% upside potential.

Disclosure: Nikolaos Sismanis didn’t hold any position at the time this article was published.

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