We feel now is a pretty good time to analyse DocuSign, Inc.'s (NASDAQ:DOCU) business as it appears the company may be on the cusp of a considerable accomplishment. DocuSign, Inc. provides cloud based software in the United States and internationally. The US$54b market-cap company posted a loss in its most recent financial year of US$243m and a latest trailing-twelve-month loss of US$204m shrinking the gap between loss and breakeven. As path to profitability is the topic on DocuSign's investors mind, we've decided to gauge market sentiment. In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
According to the 21 industry analysts covering DocuSign, the consensus is that breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of US$152m in 2024. Therefore, the company is expected to breakeven roughly 3 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 100% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for DocuSign given that this is a high-level summary, but, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with DocuSign is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
There are key fundamentals of DocuSign which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at DocuSign, take a look at DocuSign's company page on Simply Wall St. We've also compiled a list of relevant factors you should further research:
- Valuation: What is DocuSign worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether DocuSign is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on DocuSign’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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