DocuSign, Inc. [NASDAQ: DOCU] has beat analyst expectations in Q1. Analysts were expecting the company to return $0.04 per share, but earnings came out at $0.07. Revenues have also beat analyst expectations by 2.62% to stand at $213.96 million. With these results, DocuSign has beat analyst expectations for 4 quarters in a row. However, the company’s billing slowed down in the last quarter. According to the CEO, this is a good thing because it is part of a strategy that the company is employing, to move away from simply selling e-signatures to a more comprehensive product package, which will solidify the company’s bottom line.
Looking at the charts, DocuSign was largely bullish in the last 24-hours, and after a slight correction, it seems to have formed a higher low at $54.68. If it opens above Thursday’s high of $54.96, then there is a chance that it could trade in the green in Friday trading. Bullish sentiment is supported by DocuSign’s price action on the monthly charts. On this chart, DocuSign has recently broken the 50-day MA at $54.21. It’s a strong indicator that there is strong bullish momentum in this stock, and could support it in near term. However, if DocuSign drops below $54.68, then chances are that it could enter into a short-term retracement. It has already broken below this level in pre-market trading, and at the time of writing, it is trading at $46.89. If it opens Friday trading at this level, then it could mean that investors are taking profits post results, as has happened with high-growth stocks in the recent past.
Nonetheless, DocuSign’s fundamentals are quite good, and could support this stock in the long run. For instance, quarterly revenue growth (yoy) is at 34.20%. This is a good indicator that its services are growing in demand.
The company is also well capitalized to meet its short-term obligations. It also has an operating cash flow of $76.09 million, which means it can likely handle its operating expenses within the financial year. These parameters are critical to its long-term sustainability in terms of being able to maintain operations.
However, like all other investments, there are risks associated with this stock. For instance, the company has negative profit margins of -60.84%. This could be an indicator that this company is not making money from its sales. While growing revenues will offset this in the long run, there is always the possibility that they won’t do it, especially if they slow down. The return on equity is also deep in the red at -103.61%. This could be an indicator that the management’s effectiveness in managing resources is weak.