When Will DocuSign, Inc. (NASDAQ:DOCU) Become Profitable?

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$31b market-cap company posted a loss in its most recent financial year of US$243m and a latest trailing-twelve-month loss of US$112m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which DocuSign will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for DocuSign

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$70m in 2024. So, the company is predicted to breakeven approximately 3 years from now. How fast will the company have to grow each year in order to reach the breakeven point by 2024? Working backwards from analyst estimates, it turns out that they expect the company to grow 62% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

Given this is a high-level overview, we won’t go into details of DocuSign's upcoming projects, though, bear in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

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.

Next Steps:

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 put together a list of important factors you should further research:

1. 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.
2. 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.
3. 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. 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.