Docusign (DOCU, Financial) experienced a significant decline, with its stock price dropping by 18.25%, despite exceeding both revenue and profit expectations. The current price is $76.03, reflecting investor concerns over future growth prospects despite the strong performance.
In its recent earnings report, Docusign (DOCU, Financial) announced adjusted earnings per share of $0.90 on approximately $764 million in revenue, surpassing the anticipated $0.81 per share on $750 million in sales. While revenue reflected an 8% year-over-year increase, billings only rose by 4%, which may signal potential slower growth moving forward. The company reported an improvement in gross profit margins by 50 basis points, reaching 79.4%, although the free cash flow decreased to $227.8 million compared to $232.1 million from the previous year.
Looking ahead, Docusign (DOCU, Financial) anticipates a sales growth slowdown to 6% for the upcoming quarter, with projected revenue close to $779 million. The full-year outlook predicts about a 6% increase, amounting to approximately $3.15 billion to $3.16 billion in annual sales.
Currently, Docusign (DOCU, Financial) trades at 16.6 times trailing free cash flow, with a market capitalization of $15.396 billion. This positions it attractively for investors if it can enhance its growth rate. The company also boasts a Price-to-Earnings (P/E) ratio of 14.88 and a Price-to-Book (P/B) ratio of 7.69, indicating that while it might be overvalued, there could be hidden value here. According to GuruFocus analysis, Docusign's GF Value is modestly overvalued and estimated around $64.82. For further details, you can check the GF Value.
Despite the recent insider selling activities and concerns about slowing growth, Docusign (DOCU, Financial) demonstrates strong financial health with a robust financial strength score, supported by a strong Altman Z-score of 6 and a comfortable interest coverage ratio, showcasing its ability to cover debts comfortably. Investors seeking potential growth opportunities will need to weigh these factors carefully against the slowing growth projections and insider selling trends.
