Is DocuSign a buy?

It's time to break down a well known “stay at home” name. Here is the breakdown of $DOCU, otherwise known as DocuSign.


Current Price: $205.70

52/Wk High: $290.23

52/Wk Low: $64.88


Market Cap: $38.1 billion


Read below for the breakdown!


DocuSign is a popular software and IT services company. DocuSign offers several software solutions for the automation of agreement processes such as digital signatures and much more. 


Due to the coronavirus pandemic business across the nation and world has shifted to digital formats and DocuSign has capitalized on that shift that looks to be a lasting change.


Taking a look at the numbers, the growth DocuSign has seen in 2020 has been nothing short of phenomenal. 


Digging into the most recent quarter, Q2 (2021) DocuSign beat across the board, delivering a $0.17 EPS beating the EPS consensus estimate of $0.08.


Furthermore, DocuSign reported total revenues of $342.2 million, up 45% year-over-year. Breaking down the revenues, Subscription revenues grew 47% to $323.6 million, while professional services and other revenues grew 25% to $18.6 million.


DocuSign also reported solid billings for the quarter, with total billings growing 61% to a whopping $405.7 million.


It is also important to note that DocuSign reported a Q2 GAAP gross margin of 74% and a free cash flow level of $99.8 million, far exceeding the previous years same time $11.9 million free cash flow level.


When it comes to guidance, management sets the bar high. DocuSign management expects Q3 total revenues to land within the range of $358 million to $362 million.


Firstly, management expects subscription revenues to land within a range of $343 million to $347 million all the while believing total billings will land within a range of $380 million to $390 million.


Secondly, management also reiterated year-end 2021 targets and believes DocuSign will report total revenues within a range of $1.384 billion to $1.388 billion. Thirdly, management believes subscription revenues for the year will land within a range of $1.315 billion to $1.319 billion.


DocuSign is also financially doing well from the balance sheet side of things.


Total Debt: $479 million


Total Liabilities: $1.551 billion


Total Assets: $2.053 billion


Cash & Short Term Inv: $674 million


Given the numbers, the valuation has gotten a little stretched and that is something to take into consideration.


Price to Sales: 31.44x


Price to Book: 72.89x


Taking in the growth across the board, the analysts could not help but be bullish. Currently, the mean price target is $261.00/share, representing a 26.88% gain.


Furthermore, the high price target is $300.00/share, representing a 45.84% gain while the low price target is $210.00/share, representing a 2.09% gain.


The big money is also bullish. Currently, 73.42% of DocuSign is owned by institutions. Top holders include The Vanguard Group, T. Rowe Price Associates, and BlackRock Institutional Trust.


Finally, taking a look at the charts DocuSign has traded mostly sideways since July. According to the six-month charts, the MACD is within a downward momentum run within a range of -1.5192 to -3.0369.


The six-month charts are also indicating an RSI of 44.68 and CCI of -60.96, both of which are not bad locations to start a position. It is also important to note that DocuSign currently trades roughly 85 points off its highs.


Overall DocuSign is an excellent company that has seen outsized growth throughout 2020 and 2021. I believe the digital work at the home trend is mostly here to stay, and that corporations will continue to use digital signature and document software like DouSigns.


In short, I like DocuSign long term but expect a large amount of volatility coming out of the pandemic due to rotation.


EAT - SLEEP - PROFIT 


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.