Docusign Stock Gains 32% in a Year: Time to Buy, Sell or Hold?

Docusign, Inc. DOCU shares have gained 31.6% in a year, outperforming the 7.6% rise of its industry and the 9.3% rally in the Zacks S&P 500 Composite.OPFI performed significantly better than its industry peers, StoneCo Ltd. STNE and Thryv Holdings, Inc. THRY. STNE and THRY shares have declined 22.4% and 47.5% in a year.One-Year Price Performance Image Source: Zacks Investment Research Docusign has also outperformed its industry and Thryv Holdings but underperformed StoneCo in the past six months. DOCU shares have gained 5.7% against the industry’s and Thryv Holdings’ 5.4% and 33.3% declines, respectively. Meanwhile, Docusign has underperformed StoneCo’s 7.4% growth.In the last trading session, the DOCU stock closed at $76.39, moving down 41.2% from the 52-week high of $107.86.While DOCU’s one-year gain might appeal to investors, is it the right time to buy the stock, hold or sell it? Let us analyze it further.Promising Growth Potential From Docusign’s IAMDOCU launched Intelligent Agreement Management (IAM) — an AI-powered platform that assists customers in creating, analyzing, managing and automating agreements throughout their lifecycle. IAM lowers manual efforts, fast-paced execution, and assist organizations in gaining greater visibility and control over their agreement data.Despite being in the early phase, the product has a high adoption rate. In the fourth quarter of fiscal 2025, management included IAM in a high-single-digit percentage of all deals and contributed more than 20% of direct sales. More importantly, management anticipates the product to generate a low-double-digit percentage proportion of the recurring subscription revenue base by the fourth quarter of fiscal 2026.Per management, IAM is the fastest-growing new product in DOCU’s history. We anticipate the momentum of this product to grow further.DOCU’s Enterprise Expansion Back on TrackIn the fourth quarter of fiscal 2025, the company added 56 customers with annual contract value (ACV) surpassing the $300,000 mark, bringing the total to 1,131. This is a significant improvement from the preceding quarter’s nine additions. This rebound hints at the efficacy of IAM, which assists DOCU in landing new large accounts and has the potential to lock in higher ACV. Continued momentum is likely to grow the deal volume exponentially and boost the top line.Docusign’s Robust Capital ReturnsReturn on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. DOCU’s trailing 12-month ROE is 42.2% compared with the industry’s average of 31.7%. Image Source: Zacks Investment Research DOCU’s Top-Line Prospects Strong, Bottom Line WeakThe Zacks Consensus Estimate for Docusign’s fiscal 2026 revenues is pegged at $3.1 billion, implying 5.3% year-over-year growth. The consensus estimate for OPFI’s 2025 earnings per share stands at $3.47, suggesting a 2.3% year-over-year decrease.IAM Monetization Might Hinder DocusignDespite showing promising results, one must keep in mind that IAM is still new in the market, raising questions about IAM adoption at scale, especially as monetization is early. If DOCU ramps up monetization, it might hurt adoption, thereby limiting the growth potential.Considering the turbulent macroeconomic situation, if a recession sets in, we might find businesses pull back or shy away from tech investments. This will either slow down or delay Docusign’s growth.DOCU’s Liquidity Position Lags IndustryIn the fourth quarter of fiscal 2025, DOCU’s current ratio registered at 0.81, lower than the industry average of 2.54. This metric declined from the preceding quarter’s 0.83 and the year-ago quarter’s 0.94. The decrease is primarily attributed to a significant rise in short-term debt, hinting at a troubled liquidity position. A current ratio of less than 1 is an added concern about DOCU’s liquidity status, suggesting an inability to pay short-term debts efficiently. Image Source: Zacks Investment Research Final Verdict: Hold Docusign’s StockWe are impressed with the momentum that Docusign’s IAM has gained and expect it to bring more customers with higher ACV, boosting the top line. Investors may find DOCU’s strong capital returns appealing. These positives cannot shadow the fact that despite having a strong top-line prospect, the bottom-line outlook looks troublesome. Furthermore, the probability of IAM’s heightened monetization, coupled with a weak liquidity position, paints a dull picture of the company.Keeping aside these pros and cons, DOCU shares have declined 10.1% in a month, indicating that it is currently riding the correction phase. This trend compels us to recommend that investors take a cautious approach, stay put and watch for further adjustments in share prices before buying.DOCU has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks 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 Docusign Inc. (DOCU): Free Stock Analysis Report StoneCo Ltd. (STNE): Free Stock Analysis Report Thryv Holdings, Inc. (THRY): 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