Does the Latest Digital Agreement Rollout Signal a Good Entry Point for DocuSign?

Ever wondered if DocuSign might actually be a bargain right now, or if the stock’s recent moves are just noise? Let’s dig in to find out if there’s real value beneath the surface. The stock has had its ups and downs, falling 2.8% over the past week and remaining nearly flat for the past month. However, it is down 25% year-to-date and 14.3% over the last year, with three-year returns still up 47.3%. Recent headlines have focused on DocuSign’s partnerships and its steady rollout of new digital agreement features. These developments have helped the company maintain relevance despite volatility in the broader tech sector. Investors are paying close attention to these innovations, suggesting the market could be reconsidering both risks and long-term potential. As for valuation, DocuSign scores a 3 out of 6 on our value checks, which hints at some areas of undervaluation. We will explore the typical valuation frameworks, but keep reading to see a more nuanced perspective that could make all the difference.

Approach 1: DocuSign Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. This method helps investors understand what a business is fundamentally worth right now based on expectations for its future performance. For DocuSign, the current Free Cash Flow (FCF) stands at $938 million. While analysts provide projections for up to five years, further estimates are extrapolated for the long term. According to these forecasts, FCF is expected to reach nearly $1.2 billion by 2030, reflecting continued growth in the digital agreements market and DocuSign’s ability to generate cash. Using the DCF model, the estimated fair value per share comes out to $101.08. This valuation suggests that DocuSign is currently trading at a 33.0% discount compared to its intrinsic value, which may indicate significant undervaluation based on cash flow fundamentals. Result: UNDERVALUED Our Discounted Cash Flow (DCF) analysis suggests DocuSign is undervalued by 33.0%. Track this in your watchlist or portfolio, or discover 878 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DocuSign.

Approach 2: DocuSign Price vs Earnings

The Price-to-Earnings (PE) ratio is one of the most commonly used methods to assess the value of profitable companies like DocuSign. This metric makes it easy to compare how much investors are paying for each dollar of a company’s earnings, which is especially helpful for businesses that have reached consistent profitability. Generally, higher growth expectations and lower risk justify a higher PE ratio, while slower growth or higher risk should lead to a lower PE. This is because investors are willing to pay more for companies with strong future prospects and reliable earnings streams. DocuSign currently trades at a PE of 48.5x. For context, the average PE for peers stands at 48.0x, while the broader software industry’s average is lower, at 31.5x. To provide a more tailored view, Simply Wall St’s Fair Ratio for DocuSign, based on its growth rate, profit margins, market cap, industry conditions, and company-specific risks, sits at 34.4x. The Fair Ratio is designed to go beyond surface-level peer or industry comparisons. It incorporates nuanced factors such as DocuSign’s earnings growth trajectory, risk profile, and profitability. This offers a deeper perspective on what multiple the market should reasonably assign to DocuSign. Since DocuSign’s current PE is over 14x higher than its Fair Ratio, the stock appears to be overvalued on earnings fundamentals. Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1405 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DocuSign Narrative

Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, powerful tool that lets you combine your perspective about a company, such as what drives its future revenue, earnings, and profit margins, with the numbers to create a story-backed financial forecast and resulting fair value. Instead of relying solely on commonly accepted ratios or analyst targets, Narratives empower you to link your understanding of DocuSign’s industry position, innovation, and risks directly to financial outcomes. This approach allows you to see how your beliefs compare to current prices and decide if now is the right time to buy or sell. On Simply Wall St’s Community page, millions of investors use Narratives to visualize how changes in news, earnings, or market conditions dynamically update fair values, ensuring your viewpoint always stays relevant. For example, some investors might be especially optimistic, projecting DocuSign’s price as high as $124.0 per share driven by strong recurring revenue from AI-powered solutions and global expansion. Others remain cautious, seeing a fair value closer to $77.0 per share due to increased competition and maturing markets. Do you think there’s more to the story for DocuSign? Head over to our Community to see what others are saying!