DocuSign Inc (DOCU, Financial) has recently shown a daily gain of 8.02%, alongside a 3-month gain of 14.27%, capturing the attention of investors and market analysts alike. With an Earnings Per Share (EPS) sitting at $0.25, the question arises: is DocuSign significantly undervalued? This article aims to delve into the valuation analysis of DocuSign, providing readers with a detailed examination of the company's financial health and intrinsic value.
Company Introduction
Founded in 2003 and public since May 2018, DocuSign offers the Agreement Cloud, an expansive suite of cloud-based software solutions that facilitates automated agreement processes and provides legally binding e-signatures from nearly any device. With a market cap of $10.90 billion and a current stock price of $53.72, a comparison to the GF Value, which estimates a fair value of $86.6, suggests that DocuSign is significantly undervalued. This juxtaposition sets the stage for an in-depth valuation analysis, blending financial metrics with critical company insights.
Summarize GF Value
The GF Value is a proprietary metric reflecting the intrinsic value of a stock, incorporating historical trading multiples, an adjustment factor based on past performance, and future business estimates. If a stock trades significantly below the GF Value Line, it suggests a potentially higher future return. DocuSign (DOCU, Financial), with its current price of $53.72 and a market cap of $10.90 billion, appears to be significantly undervalued, indicating the potential for a greater long-term return on investment.
Financial Strength
Assessing a company's financial strength is crucial to avoid capital loss. DocuSign's cash-to-debt ratio stands at 1.9, ranking below 53.5% of its peers in the Software industry. However, its overall financial strength score is a solid 7 out of 10, indicating a fair financial condition.
Profitability and Growth
Profitable companies generally pose less risk, and DocuSign's profitability has been consistent over the past decade. With an operating margin of 1.92%, it falls below 51.84% of its industry counterparts. Despite this, DocuSign's growth is impressive, with a 3-year average annual revenue growth rate of 31.5%, outperforming 85.3% of the industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another profitability indicator. DocuSign's ROIC is currently 1.19, significantly lower than its WACC of 9.51, suggesting challenges in generating cash flow relative to its capital investments.
Conclusion
In conclusion, DocuSign (DOCU, Financial) is believed to be significantly undervalued. The company's financial condition is fair, but its profitability is considered poor. Despite this, its growth outshines many within the Software industry. For a more comprehensive understanding of DocuSign's financial journey, interested parties can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
