Docusign Benefits From eSignature Demand, Low Liquidity Ails

Docusign, Inc. DOCU stock has gained 32.1% in a year against the industry and the Zacks S&P 500 composite’s decline of 4.7% and 2.4%, respectively.Docusign reported impressive fourth-quarter fiscal 2025 results. DOCU’s EPS (excluding 47 cents from non-recurring items) was 86 cents, which surpassed the Zacks Consensus Estimate by 2.4% and increased 13.2% from the year-ago quarter. Total revenues of $776.3 million beat the consensus mark by 2.1% and rose 9% from the fourth quarter of fiscal 2024.How is Docusign Faring?Docusign’s top line significantly benefits from continued customer demand for eSignature in a large addressable market. DOCU’s customer base has grown from 1.3 million in fiscal 2023 to 1.5 million in fiscal 2024 and then to 1.7 million in fiscal 2025. This trend leads us to believe that the growth can be sustained in the future as well.Despite this rising demand, the market for eSignatures remains largely untapped. The global e-signature platform market size was $5.2 billion in 2024 and is expected to reach $18.6 billion by 2029. In this expansive market, Adobe Acrobat Sign is the major competitor to DOCU’s eSignature, leaving a significant market share for the latter to address. Hence, the company is exposed to sufficient opportunities to expand eSignature across businesses globally, which will boost its top line.Over the past three years, subscription fees have contributed to 97% of DOCU’s top line on average. The company’s subscription plans generally range from one year to three years and the fees include the use of its products and access to customer support. A subscription model is very useful for software developers because it creates a recurring revenue stream and improves the visibility of cash flows.Furthermore, it also makes expensive software affordable and accessible to companies with limitations on resources, thus expanding the market. DOCU’s direct and indirect go-to-market initiatives also facilitated growth with commercial and enterprise customers. Multiple customer programs and initiatives and an expanded customers have gradually increased subscription revenue growth over time. The 7.8% growth in subscription revenues in fiscal 2025 is a testament to the company’s successful endeavour at winning and retaining customers.Docusign has strengthened its relationships with tech giants such as Salesforce and Microsoft. The company has expanded its global strategic partnership with Salesforce. Docusign and Salesforce partnered to develop solutions for the automation of the contract creation process and the expansion of collaboration among organizations that use the latter’s Slack. With Microsoft Teams, DOCU has made an eSignature integration and become the official electronic signature provider in the former’s Approvals app. Partnerships enable Docusign to tap into more accounts than it could individually.However, Docusign’s current ratio (a measure of liquidity) was 0.81 at the end of fourth-quarter fiscal 2025, down from the industry’s 2.54 and the year-ago quarter's 0.94. A declining current ratio due to a decrease in cash does not sit well for the company’s liquidity position. Furthermore, a current ratio of less than 1 indicates that the company does not have the resources to cover its short-term obligations.Image Source: Zacks Investment ResearchDocusign has never declared and currently does not intend to pay out cash dividends. So, the only way to achieve a return on investment on the stock is price appreciation, which is not guaranteed. Hence, investors seeking cash dividends should avoid buying DocuSign’s shares.Zacks Rank & Stocks to ConsiderDOCU has a Zacks Rank #3 (Hold) at present.Some better-ranked stocks in the broader Zacks Computer and Technology sector are Broadcom Inc. AVGO and CommScope COMM.Broadcom sports a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.AVGO has a long-term earnings growth expectation of 19%. It delivered a trailing four-quarter earnings surprise of 3.4%, on average.CommScope currently flaunts a Zacks Rank of 1.COMM has a long-term earnings growth expectation of 19.4%. It delivered a trailing four-quarter earnings surprise of 73%, on average.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Broadcom Inc. (AVGO): Free Stock Analysis Report CommScope Holding Company, Inc. (COMM): Free Stock Analysis Report Docusign Inc. (DOCU): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks