Docusign Declines 23% in 6 Months: Should You Buy the Stock Right Now?

Docusign, Inc.’s DOCU shares have significantly declined in the past six months. It has fallen 23.1% against the industry’s 1.1% growth and the Zacks S&P 500 composite’s 19.5% rally.

6-Month Share Price Performance

The recent performance paints a different picture, wherein DOCU shares have moved up 1.5% in the past month, signalling an end to the correction phase.

The decline in DOCU shares over the past six months may appear highly appealing to investors, compelling them to initiate a buy. Let us analyze further to find out whether buying the stock now is a sound decision.

Microsoft & Salesforce: DOCU’s Secret Sauce to IAM

Docusign has collaborated with tech giants like Microsoft MSFT and Salesforce CRM to improve the integration capabilities of its Intelligent Agreement Management (IAM) platform. These partnerships are key to optimizing agreement workflows and generating AI-backed data that enhances user experience.

DOCU’s decision to embed Microsoft 365 and Salesforce’s CRM suite provides swift agreement management within platforms used by enterprises on a regular basis. What this integration does best is the simplification of contract processes, boosting decision-making and creating a unified ecosystem where the collaboration between legal, sales and procurement teams is efficiently done.

IAM has surpassed its status as just an e-signature solution and has become a comprehensive digital agreement hub. From drafting contracts within Microsoft Word to managing client pipelines in Salesforce, DOCU’s IAM ensures swift document movement via automated intelligent workflows. Partnering with these tech giants deepens customer reliance on Docusign’s offerings.

DOCU’s partnership with Microsoft and Salesforce will play a pivotal role as businesses become more inclined toward modernizing agreement processes. We expect this collaborative approach to feed into enhancing DOCU’s user retention and boosting its competitive edge in the software-as-a-service landscape.

DOCU: A Cheap Stock With Strong Capital Returns

Docusign is priced at 17.44 times forward 12-month price-to-earnings, below the industry average of 34.09 times. It indicates that the market may be overlooking this stock’s potential, and there is a high chance that the stock price may increase if investors recognize its value. Hence, investors may find this stock appealing under the pretext that this undervalued stock may generate higher returns in the long run.

On the return on capital front, DOCU’s return on equity is at 38% surpassing the industry’s 33.4%. It suggests that management is utilizing its capital effectively to generate profit. The fact that this metric beats the industry elevates the company's competitive edge.

The ability to generate robust capital returns builds a strong case for the stock being undervalued, as it is a profitable and efficiently run company that the market is not valuing judiciously compared with its industry peers.

DOCU’s Top & Bottom-Line Outlook Looks Promising

The Zacks Consensus Estimate for DOCU’s fiscal 2026 revenues is pinned at $3.2 billion, hinting at 7.3% year-over-year growth. For fiscal 2027, the same is anticipated to grow 3.9% year over year. The consensus estimate for Docusign’s fiscal 2026 EPS stands at $3.69, indicating 3.9% year-over-year growth. For 2026, the estimate is set at 9.9% growth.

Over the past 60 days, one EPS estimate for both fiscal 2026 and 2027 has been revised upward without any single downward adjustment. In the same period, the Zacks Consensus Estimate has moved up marginally.

This enticing long-term growth trajectory solidifies DOCU’s position as a profitable company, hinting at its ability to generate long-term shareholder value.

Buy Docusign Now

We recommend that investors buy this stock now despite its weakness over the past six months. The recent performance highlights that the stock has ended its correction phase, and we expect it to climb high in the long run.

DOCU has discovered its strength in collaborating with tech giants to improve its IAM. In doing so, it has strengthened customer relationships and we expect this to provide a significant competitive edge.

Our projection related to this stock's long-term growth is solidified by the fact that this fundamentally strong stock is trading at a discount and carries the potential to generate strong capital returns, waving a massive green flag for investors.

DOCU currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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