DocuSign stock (NASDAQ:DOCU) has seen one of the most spectacular falls from grace during the 2022 bear market. The stock (NASDAQ:DOCU) price of the e-signature software vendor has returned to pre-COVID levels after rising over $300 a year ago.
With the stock falling back to its IPO level from April 2018, investors may want to get on board for the possible next journey higher. DocuSign’s slogan may be “growth at a reasonable price,” but with further downside conceivable in a depressed market, an even more affordable price may appear down the line. That being stated, will DocuSign be unavailable indefinitely?
Market Analysis of DocuSign Stock
DocuSign has been unable to capitalize on its exceptional fiscal 2022 growth, and subsequent profitability data has decreased year over year. Following a year of quarterly EPS gains of 267%, 176%, 164%, and 30%, the bottom line plummeted 14% and 6% in Q1 and Q2, respectively. Slowing growth is one thing, but negative growth might be more challenging to justify to the market.
Things are expected to deteriorate more in the second half. Wall Street expects DocuSign to announce EPS declines of 28% and 15% in the following two quarters. Analysts expect a return to growth in the first quarter of fiscal 2024, but from a worse foundation than in fiscal 2023.
The Fundamentals Have Slackened
Due to DocuSign’s failure to reach that next gear of development, longstanding CEO Dan Springer and COO Scott Olrich resigned in June 2022. This puts the firm on precarious footing as it establishes a new leadership team and a fresh growth plan.
The next CEO will receive a set of financial statements that seem to be in jeopardy. The market’s main gripes have been below-peer growth and negative net margins, but the balance sheet may be the most concerning. Debt accounted for 64% of DocuSign’s capital structure at the end of the previous quarter. It is, therefore, in the lowest quintile of its technical peers. Should it need to take on further debt as interest rates rise, it will have to do so at a higher cost of capital.
Should You Make an Investment in DocuSign Stock Right Now?
The good news is that DocuSign stock (NASDAQ:DOCU) is no longer as pricey as it was in terms of value. At 28x trailing earnings, DocuSign stock (NASDAQ:DOCU) is fairly in line with the average P/E for the tech sector, which is 25x. Given the expected growth over the next 12 months, the PEG ratio isn’t very appealing when compared to its rivals.
On the plus side, DocuSign is the undisputed leader in the e-signature sector, which it essentially founded when it began in 2003. Although new competitors have developed, DocuSign’s market position and brand power have been challenging to overcome.
The development of the Agreement Cloud platform is projected to drive future growth.
The long-term growth scenario remains appealing, but a slew of near-term obstacles will put DocuSign stock under pressure for the foreseeable future. This has all the hallmarks of a turnaround tale, but investors should hold off on placing “buy” orders for the time being.
Featured Image- Megapixl @ Transversospinales