DOCU Looks Cheap, But Is It a Value Trap or Treasure?
Here is why we think Docusign (DOCU) deserves consideration as a value stock.
- Reasonable Revenue Growth: 7.9% LTM and 10.9% last 3 year average.
- Cash Generative: Nearly 30.2% free cash flow margin and 7.9% operating margin LTM.
- No Major Shocks: DOCU has avoided any revenue collapses in the last 3 years.
- Modest Valuation: Despite encouraging fundamentals, DOCU trades at a PE multiple of 13.0
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher revenue growth, but lower margins
As a quick background, Docusign provides e-signature and contract lifecycle management solutions that digitally prepare, sign, manage agreements, and automate workflows, delivered via direct, partner-assisted, and web-based sales.
| DOCU | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Application Software | – |
| PE Ratio | 13.0 | 23.7 |
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| LTM* Revenue Growth | 7.9% | 5.1% |
| 3Y Average Annual Revenue Growth | 10.9% | 5.2% |
| Min Annual Revenue Growth Last 3Y | 7.9% | -0.3% |
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| LTM* Operating Margin | 7.9% | 18.7% |
| 3Y Average Operating Margin | 3.5% | 17.8% |
| LTM* Free Cash Flow Margin | 30.2% | 13.0% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell DOCU Stock to see if Docusign still has an edge that holds up under the hood.
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That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
Stocks Like These Can Outperform. Here Is Data
For 65 similar value stocks chosen as of mid 2024, consider the following stats for the subsequent 1 year period.
- Average peak return of 39.3% vs 14.4% for S&P, with maximum peak return of 133%
- Win rate of 60%; win rate represents % of stocks with positive return
- Average 1-year return of 14.6%, similar to S&P’s despite tariff instability
But Consider The Risk
That said, DocuSign isn’t immune to big drops. It fell about 45% during the 2018 correction, and the declines were even sharper in the Covid pandemic and the inflation shock, both seeing over a 56% slide from peak to bottom. These aren’t wild swings for small names either. Even with solid fundamentals, when the market turns south, DocuSign has shown it can get hit hard.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read DOCU Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.