DOCU Stock Delivering Enormous Returns
The COVID-19 pandemic has brought unprecedented challenges to many industries. At the same time, it has created some new opportunities. DocuSign Inc (NASDAQ:DOCU), for instance, saw its business flourish during the lockdowns.
It’s easy to understand why DocuSign is a pandemic-proof stock. The company is known for its “eSignature” solution, which allows different parties to securely sign agreements without having to be in the same room.
During the lockdown months, when most people couldn’t go to in-person meetings, DocuSign Inc’s eSignature solution became the go-to choice when people needed to sign documents.
As you might expect, the company was able to substantially boost its financials in the extraordinary economic environment.
In the 12 months ended January 31, 2021—which was DocuSign’s fiscal year 2021—it generated $1.5 billion of total revenue, marking a 49% increase year-over-year. (Source: “DocuSign Announces Fourth Quarter and Fiscal Year 2021 Financial Results,” DocuSign Inc, March 11, 2021.)
Moreover, the company’s billings—which reflect sales to new customers plus subscription renewals and additional sales to existing customers—totaled $1.7 billion. That represented a 56% increase over the prior fiscal year.
The biggest improvement, though, was on the bottom line. In DocuSign’s fiscal 2021, the company earned adjusted net income of $0.90 per diluted share, which nearly tripled the $0.31 per share it earned in its fiscal 2020.
Simply put, DocuSign Inc’s business grew enormously in the pandemic-struck calendar year 2020. And unsurprisingly, DocuSign stock shot through the roof.
The economy has grown a lot since the lockdown months, and some of the “stay-at-home” stocks that soared last year have pulled back from their earlier highs.
But DocuSign continues to attract investor attention. In fact, on September 3, DOCU stock surged by another 5.3%.
DocuSign Inc (NASDAQ:DOCU) Stock Chart
Chart courtesy of StockCharts.com
The reason DocuSign went up on September 3 has to do with the company’s latest earnings report, which was released after the closing bell on September 2.
The report showed that, in the second quarter of the company’s fiscal 2022, which ended July 31, 2021, it generated $511.8 million of total revenue, a 50% increase year-over-year. Notably, its subscription revenue grew by 52% from a year earlier to $492.8 million. (Source: “DocuSign Announces Second Quarter Fiscal 2022 Financial Results,” DocuSign Inc, September 2, 2021.)
In other words, while we’re not in a stay-at-home environment anymore, DocuSign’s business has continued to grow at an extremely impressive pace.
In the second quarter, the company’s billings totaled $595.4 million, up 47% from a year earlier. Its adjusted earnings came in at $0.47 per diluted share, up by a whopping 176% year-over-year.
The company also generated $161.7 million of free cash flow, a huge improvement from the $99.8 million of free cash flow in the same period of last year.
The best, though, is likely yet to come.
When asked about DocuSign Inc’s future growth, the company’s chief executive officer, Dan Springer, said that, in the electronic signature business, the total addressable market is about $25.0 billion.
He also said that, with annual revenue of about $2.0 billion, DocuSign is already a leader and that “this is an underpenetrated space.” (Source: “DocuSign, Inc. (DOCU) CEO Dan Springer on Q2 2022 Results – Earnings Call Transcript,” Seeking Alpha, September 2, 2021.)
He explained, “So, and if you think about the fact that we’ve got a little over a million customers, we got pretty excited to say we passed a million customers. But I mean, just in the U.S. alone, there are like 25 million businesses,” explained Springer. (Source: Ibid.)
He added, “…the answer is we’re going to be adding a lot of new customers every quarter for years to come.”
For the third fiscal quarter of 2022, DocuSign’s management expects the company to generate $526.0 to $532.0 million in total revenue and $585.0 to $597.0 million in billings.
As it stands, DocuSign Inc has been running a well-established business.
The company has more than a billion users worldwide and approximately 1.1 million paying customers. As more businesses adopt its eSignature solutions, I wouldn’t be surprised to see DocuSign continue its growth momentum.
All that bodes well for DOCU stock investors.