Investors in DocuSign (NASDAQ:DOCU) from three years ago are still down 80%, even after 8.4% gain this past week

Every investor on earth makes bad calls sometimes. But you have a problem if you face massive losses more than once in a while. So consider, for a moment, the misfortune of DocuSign, Inc. (NASDAQ:DOCU) investors who have held the stock for three years as it declined a whopping 80%. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. On the other hand the share price has bounced 8.4% over the last week. But this could be related to the strong market, with stocks up around 4.0% in the same time. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.

Check out our latest analysis for DocuSign

Given that DocuSign only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

In the last three years, DocuSign saw its revenue grow by 16% per year, compound. That's a pretty good rate of top-line growth. So it seems unlikely the 22% share price drop (each year) is entirely about the revenue. More likely, the market was spooked by the cost of that revenue. If you buy into companies that lose money then you always risk losing money yourself. Just don't lose the lesson.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

DocuSign is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for DocuSign in this interactive graph of future profit estimates.

A Different Perspective

DocuSign shareholders are up 19% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 5% over half a decade This suggests the company might be improving over time. Before spending more time on DocuSign it might be wise to click here to see if insiders have been buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.