DocuSign's (NASDAQ:DOCU) stock is surging along with demand for digital signatures as companies across the world get used to the new COVID-19 normal. That wheeling and dealing online may not dissipate even as shelter-in-place restrictions begin to ease.

Add brand name recognition and an expanding business offering to the mix, and it's clear DocuSign is more than a COVID-19 play.

A man signing his name on a tablet.

Image source: Getty Images.

DocuSign shines during the pandemic 

DocuSign has emerged as a go-to resource during the pandemic. With offices closed around the world, its eSignature tool is enabling its half a million paying customers and hundreds of millions of individual users to continue to complete contracts, close real estate transactions, onboard new employees, and engage in a host of other agreements over the Internet. 

But DocuSign isn't only riding the newfound demand for its existing offering. It's also supporting developers in new markets created by the pandemic, including remote patient onboarding, emergency lending, remote learning, and remote notary services. In late April, DocuSign said the number of new use cases it's seeing for its technology from organizations and governments globally is "staggering." 

Not all of these possibilities will pan out, but if DocuSign is able to expand into, say, healthcare or remote learning, it could continue to pursue those opportunities well after the virus is contained. The more industries DocuSign serves, the better it cushions the blow from any pandemic-induced slowdowns. Revenue has already grown more than 30% in each of the two years since it went public, and with high gross margins of 75% and expanding customers, profitability is in DocuSign's sights.

DocuSign's offering is expanding way beyond eSignatures 

But the tech stock isn't only relying on a post-pandemic world for its growth. It's been expanding its offering beyond digital signatures, launching its Agreement Cloud -- a suite of cloud-based applications covering all aspects of a deal -- last year. It boasts integration with more than 350 third-party applications including Salesforce (NYSE:CRM). Salesforce is a key player in the enterprise software market and an important partner for DocuSign. The cloud enables DocuSign to expand what it offers its customers without cannibalizing its core eSignature product.

Then there's its acquisition of Seal Software, a contracts analytics and artificial intelligence company that should help DocuSign further its goal of becoming a one-stop-shop for contracts. Through Seal Software, DocuSign will be able to automate several aspects of contracts, while analyzing risk and identifying business opportunities for clients. As it stands, enterprise and commercial customers are a small portion of DocuSign's 589,000-customer base, accounting for just 75,000 at the end of its fiscal year 2020. But that figure has risen 27% from fiscal 2019 and should increase more thanks to the company's cloud initiatives, its Seal Software acquisition, and COVID-19. 

Being able to offer a suite of services from the start of a contract to the finish differentiates DocuSign from its eSignature rivals and increases the revenue it generates from its existing customers. More importantly, this distinction boosts the company's subscription revenue, an attractive reason to own a stock like DocuSign. DocuSign thinks its core eSignature market is a $25 billion opportunity. Expanding into the other aspects of a contract could potentially double that. With the company posting revenue of nearly $1 billion this past year, it has a lot of room to grow. 

A healthy lead over rivals 

DocuSign has one more thing going for it that should carry it well beyond the pandemic: first-place advantage. According to market research firm Datanyze, DocuSign controls 57.8% of the electronic signature market. Its second-place rival -- Right Signature -- has just 9.15%, while Adobe (NASDAQ:ADBE) holds a mere 5.14% of the market.

Even with a wide lead, DocuSign has to stay in front of its competitors to protect its position, which means it has to spend money. Yet its investments on this front seem to be falling. For fiscal year 2020, DocuSign spent 19% of revenue on research and development. That proportion is forecast to drop to between 13% and 15% of revenue for fiscal 2021. Given DocuSign's anticipated revenue for 2021, that works out to a smaller actual dollar amount in R&D spending next year, even with the company's projected top-line growth. Prospective investors should keep an eye on this line item to make sure that DocuSign's doing enough to stay ahead of its rivals.

The investments DocuSign makes today will hopefully pay off in the long run, but they could put downward pressure on shares from time to time. So could the ever-shifting landscape of the pandemic. Any pullback in DocuSign's stock could present a buying opportunity for investors. Sure, DocuSign's stock is up roughly 66% year to date, but with an addressable market that's expanding, and the opportunity to generate more revenue from existing customers, it might be an attractive buy-on-the-dip stock. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.