The company doesn’t operate in the hottest tech niche, but its recent performance has been solid.
A stock split is always a piece of market-shaking news for a publicly traded company. This classic piece of financial engineering is usually a sign that a stock has grown so popular, its per-share price has to be reduced enough to avoid sticker shock.
Bearing that in mind, let’s take a look at how a shareholding in DocuSign (DOCU 1.37%) has changed since the e-verification specialist’s 2018 IPO. We’ll try a pop quiz — how many shares would you now hold if you had acquired a single one of the company back then?
Very low share count growth
That’s a trick question, sorry (I couldn’t resist). DocuSign has never enacted a stock split since its IPO, so one share bought back then would stand at one now. A split might have been a consideration earlier this decade, when the company’s stock price topped $300 per share at one point.
These days it’s only $61 and change, and that’s not completely surprising. It’s considered to be something of a maturing business, and in the tech sector such enterprises generate less excitement than young companies posting monster sales growth (despite the usual accompaniment of significant bottom-line losses).
Compounding that, DocuSign doesn’t operate in a cool segment of the industry. The core way it earns its living is document verification, which no matter how cutting-edge and useful probably isn’t a compelling “story” for many individual and institutional investors.
Something of a sleeper
That’s a shame, because DocuSign has been posting some very satisfying numbers lately. This theoretically mature business still generated 7% year-over-year sales growth (to $736 million) in its most recently reported quarter, thanks in no small part to an 11% increase in customer count. Better, non-GAAP (adjusted) net income soared 34% higher to almost $201 million. Note the wide profit margin, meanwhile.
This is clearly a company that knows how to keep the growth engine going and profitability commensurately high. That, combined with a modest valuation — forward P/E is only 16.6 — makes it feel very much like a buy to me.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Docusign. The Motley Fool has a disclosure policy.