Long-established in the Software industry, DocuSign Inc (DOCU, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 5.16%, juxtaposed with a three-month change of -14.93%. Fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of DocuSign Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- 1. Financial strength rank: 5/10
- 2. Profitability rank: 3/10
- 3. Growth rank: 5/10
- 4. GF Value rank: 2/10
- 5. Momentum rank: 5/10
Based on the above method, GuruFocus assigned DocuSign Inc the GF Score of 63 out of 100, which signals poor future outperformance potential.
DocuSign Inc: A Snapshot
DocuSign Inc, with a market cap of $10.05 billion, offers the Agreement Cloud, a broad cloud-based software suite that enables users to automate the agreement process and provide legally binding e-signatures from nearly any device. Founded in 2003, the company completed its IPO in May 2018. Despite its impressive sales of $2.59 billion, it has an operating margin of -0.63, indicating potential profitability issues.
Financial Strength Analysis
DocuSign Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Its interest coverage ratio of 0 positions it worse than 0% of 1539 companies in the Software industry, highlighting potential challenges in handling its interest expenses on outstanding debt.
The company's Altman Z-Score is just 2.58, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81.
Additionally, the company's debt-to-Ebitda ratio is 26.78, which is above Joel Tillinghast's warning level of 4 and is worse than 98.04% of 1375 companies in the Software industry. A high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Profitability Concerns
DocuSign Inc's low Profitability rank can also raise warning signals. This indicates that the company may struggle to generate profits, which could impact its ability to deliver returns to investors.
Looking Ahead
Considering the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While DocuSign Inc has made significant strides in the Software industry, these metrics suggest that it may face challenges in maintaining its growth trajectory.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
