Docusign Shares Surge 28% in 3 Months: Right Moment to Invest?

Docusign, Inc. DOCU has seen a notable rise in its stock price, soaring 27.9% in the past three months compared with the broader industry’s 7.3% growth.As of the last trading session, DOCU’s stock closed at $71.78, close to its 52-week high of $73.8. Additionally, it is trading above its 50-day moving average, suggesting a bullish sentiment among investors.Image Source: Zacks Investment ResearchGiven the continued strength in DOCU shares, investors might be tempted to buy the stock. But is it still a good time to buy DOCU? Let’s find out.Docusign's Growth Fueled by DemandDocusign’s top line is significantly benefiting from continued customer demand for eSignature in a large addressable market. DOCU’s customer base has grown steadily with 1.1 million in fiscal 2022, 1.3 million in fiscal 2023, and 1.5 million in fiscal 2024. Taking the trend into consideration, we can expect this growth to be sustained in the coming years as well. Despite this rising demand, the market for eSignature remains largely untapped. Therefore, Docusign has ample opportunities to expand eSignature across businesses globally which will boost its revenues.Docusign’s subscription fees account for 97% of the total revenues. DOCU’s subscription fees include the use of its products and access to customer support and the subscriptions generally range from one to three years. A subscription model is very useful for software developers because it stabilizes revenue streams and improves the visibility of cash flows. It also makes expensive software more easily 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 for commercial and enterprise customers. Numerous customer programs and initiatives have gradually increased subscription revenue growth over time. In fiscal 2024, subscription revenues increased 10%, primarily due to the expansion of revenues from existing customers and new customer additions.Docusign’s international revenues have increased consistently over the past three years. Its international revenues represented 23%, 25%, and 26% of total revenues in 2023, 2023 and 2024, respectively. DOCU started its international selling efforts in Canada, the U.K., and Australia where it can leverage its core technologies due to similar approaches to e-signature in these countries and the United States. The company has experienced a rise in demand across multiple geographies and is directing its sales and marketing efforts to tap this potential.Docusign has deepened its relationships with tech giants such as Salesforce CRM and Microsoft MSFT. For instance, the company has expanded its global strategic partnership with Salesforce. Docusign and Salesforce jointly develop solutions for the automation of the contract creation process and expansion of collaboration among organizations that use Salesforce’s Slack. Docusign made an eSignature integration with Microsoft Teams last year and is currently an official electronic signature provider in Microsoft Teams’ Approvals app. These partnerships enable the company to sell into a far greater number of accounts than it could have done alone.DOCU has Healthy Returns on CapitalReturn on equity (ROE), an indicator of profitability, shows how efficiently a company uses its shareholders' investments to generate earnings. DOCU’s trailing 12-month ROE is 53.7% compared with the industry’s 9.5%.Image Source: Zacks Investment ResearchDocusign has demonstrated effective investment in profitable areas, as reflected in its return on invested capital (ROIC). The company’s trailing 12-month ROIC is 12.9%, ahead of the industry average of 4.4%.Image Source: Zacks Investment ResearchStrong Top and Bottom-Line ProspectsThe Zacks Consensus Estimate for DOCU’s fiscal 2025 earnings is pegged at $3.45, indicating 15.8% growth from the year-ago level. Earnings in fiscal 2026 are expected to increase 6% from the year-ago actuals. The company’s sales for fiscal 2025 are expected to increase 6.5% and 6% year over year, respectively, in fiscal 2025 and 2026.Seven estimates for fiscal 2025 moved north in the past 60 days versus no southward revisions, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for fiscal 2025 earnings has moved up 6.8% in the past 60 days.DOCU is Must BuyDocusign presents a strong case for investment due to its impressive market performance and continued growth potential. The company has experienced significant momentum in recent months, demonstrating resilience and adaptability in a rapidly expanding eSignature market. Docusign’s ability to attract a growing customer base, coupled with its subscription-based revenue model, ensures long-term stability and predictable cash flows. Partnerships with major tech players like Salesforce and Microsoft boost its integration capabilities, enabling Docusign to reach a broader client base and enhance its product offerings.Given the positive market sentiment, the company’s strong partnerships, and its ability to capitalize on an untapped market, Docusign remains an appealing choice for investors looking for sustained growth and strategic opportunities in the digital space.DOCU currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Infrastructure Stock Boom to Sweep AmericaA massive push to rebuild the crumbling U.S. infrastructure will soon be underway. 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