Software company DocuSign (NASDAQ:DOCU) crashed following the release of its latest earnings report last week. Significant volatility is nothing new for the stock as the business has been struggling to generate consistent growth. Known for its electronic signatures, which make it easy to sign documents remotely, the company's growth prospects aren't as strong as the economy returns to normal and more people are back working at offices.
On March 9, the company released its fourth-quarter results. Revenue for the period ending Jan. 31 totaled $659.6 million and was up 14% year over year. Net income of $4.9 million was an improvement from the $30.4 million loss that the company incurred in the prior-year period. However, DocuSign is only projecting revenue between $639 million and $643 million for the first quarter, suggesting a slow down in Q1. A year ago, in Q4, the company's sales rose at a rate of 35%.
With only modest profitability, investors have shunned DocuSign's stock as it hasn't made for a good buy, trading at 28 times its book value and more than five times revenue. The stock was doing well to start 2023 but these latest results have unfortunately undone all of that progress.
Growth stocks such as DocuSign could fare worse as the year goes on given that interest rates may continue rising higher than expected. Investors are better off avoiding DocuSign stock right now as the company's fundamentals aren't great and the company's growth isn't nearly as impressive as it once was. At its current valuation, it would be hard to justify buying shares of the stock.
