Shares of DocuSign (NASDAQ:DOCU) jumped last week after the company posted its latest earnings
numbers. The tech company reported revenue of $622.2 million for the period ending July 31, which
was a 22% increase year over year. DocuSign's numbers beat expectations and led to the stock rising in
value on the day – a stark contrast from previous earnings reports where it wasn't uncommon to see its
shares plummet by more than 20%.
The company's business, which focuses on e-signatures and allowing people to virtually sign documents,
flourished during the early stage of the pandemic. But now with the economy returning to normal, there
hasn't been the same type of bullishness behind the stock. Although it rose to more than $60 a share on
Friday, it's nowhere near its 52-week high of $288.50
The positive for investors is that the business is anticipating some consistency, projecting that its sales
will be slightly higher in Q3, within a range of $624 million and $628 million. DocuSign also has more
than $1.1 billion in cash and investments as of the end of Q2. And during the period, it also generated
free cash flow of $105.5 million.
DocuSign's stock trades at 33 times future earnings, which is still a bit expensive for a tech stock that
isn't generating much growth. Although the company's recent results are encouraging, especially since
they didn't result in a large selloff, this is still a risky investment to be holding. Without a catalyst that
will improve its growth potential, investors are still better off avoiding DocuSign.
