DocuSign (DOCU) Valuation Check As New AI eSignature Tools Expand Agreement Platform Ambitions

DocuSign (DOCU) just rolled out new AI assisted eSignature tools that summarize contracts in plain language and automate field placement, sharpening the focus on how this product shift might matter for the stock.

See our latest analysis for DocuSign.

Despite the product rollout, DocuSign’s recent 30 day share price return of 17.49% and 90 day share price return of 19.63% point to fading momentum. The 1 year total shareholder return decline of 37.27% highlights longer term pressure that this kind of AI push is trying to counter.

If this AI shift has you thinking about where digital agreement and automation trends might show up next, it could be worth scanning high growth tech and AI stocks as a way to spot other potential tech names on your radar.

With DocuSign trading at US$57.46, carrying an intrinsic discount of about 43% and a roughly 48% gap to the average analyst target, you have to ask: is this genuine undervaluation, or is the market already pricing in whatever growth comes next?

Most Popular Narrative: 33.6% Undervalued

Compared to the last close at $57.46, the most followed narrative pegs DocuSign’s fair value at about $86.50, using an 8.45% discount rate to get there.

The analysts have a consensus price target of $93.162 for DocuSign based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $124.0, and the most bearish reporting a price target of just $77.0.

Read the complete narrative.

Curious what earnings path and margin profile could justify that valuation gap, and why it still leans on a rich future earnings multiple? The full narrative lays out those assumptions in detail, including how modest revenue growth and share count changes are stitched together into that fair value story.

Result: Fair Value of $86.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this depends on DocuSign avoiding slower IAM adoption while also keeping competition and pricing pressure from eroding the earnings path that analysts are assuming.

Find out about the key risks to this DocuSign narrative.

Another View: Earnings Multiple Sends a Different Signal

Those fair value models point to upside, but the current P/E of 38.1x paints a tighter picture. It sits above the US Software industry at 30.8x, above peers at 37.2x, and above the fair ratio of 32.6x. This suggests there is less margin for error if the story disappoints.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own DocuSign Narrative

If you are not fully on board with this view, or prefer working through the numbers yourself, you can build a custom thesis in a few minutes: Do it your way.

A great starting point for your DocuSign research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If DocuSign has caught your eye, do not stop there. The real edge comes from comparing it with other focused ideas pulled straight from curated stock lists.

• Spot potential mispricings early by checking out these 864 undervalued stocks based on cash flows that may be trading below their estimated worth based on cash flows and fundamentals.
• Explore the AI theme by scanning these 24 AI penny stocks that are tied to artificial intelligence across different parts of the market.
• Consider these 3523 penny stocks with strong financials that already carry solid financial profiles instead of relying purely on hype.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com