There's little doubt that the demand for electronic signatures has increased dramatically as a result of the coronavirus pandemic. As remote work and social distancing swept the globe, the ability to finalize the paperwork for a transaction with a few keystrokes and the click of a mouse became invaluable as one of many tools that kept businesses moving forward while helping to stem the tide of the pandemic.

The undisputed leader in the space, DocuSign (NASDAQ:DOCU), controls about 70% of the e-signature market and was the biggest beneficiary of the increased adoption of digitally approved documents. The stock has gained 96% so far in 2020, while the S&P 500 has just barely gotten back to breakeven.

Yet even as the need for digital signatures grows, there's another area that represents an even bigger opportunity for DocuSign, and this is the one that should have investors positively giddy about the future.

Woman on a laptop using DocuSign to generate an electronic signature.

Image source: DocuSign.

Contracts are more than just signatures

Early last year, the company introduced the DocuSign Agreement Cloud, a suite of applications and integrations designed to help organizations automate the entire agreement process, including preparing, signing, acting on, and managing those agreements. This could include (but isn't limited to) job offer letters from human resource departments to job candidates or sales contracts between buyer and seller.

DocuSign believes this represents the "next big cloud opportunity," according to CEO Dan Springer. Over the past several years, DocuSign has broadened these product and service offerings to expand into every aspect of the agreement process.

One example is that of SpringCM, a company DocuSign acquired in mid-2018. The company was a leading provider of cloud-based software for document generation and contract life cycle management. From this springboard, DocuSign has expanded the offering, now dubbed DocuSign CLM, which was recently named by Gartner as a leader in its 2020 Magic Quadrant for contract life cycle management.

Just this year, DocuSign closed on a deal to acquire Seal Software, which brought cutting-edge artificial intelligence (AI) and contract analytics to the table. This all plays into DocuSign's Agreement Cloud, which will now offer the ability to quickly search large collections of agreements by legal concept instead of just searching by keywords. These sophisticated algorithms will automatically extract, analyze, and compare contract terms, and identify areas of risk or even business opportunity for DocuSign's customers. 

Show and tell

All the opportunity in the world is meaningless, however, unless a company has the ability to execute, and the proof, they say, is in the pudding. In fiscal 2020 (which ended Jan. 31, 2020), DocuSign generated revenue of $974 million, an increase of 39% year over year, while subscription revenue climbed 38%. Gross margins ticked up to 75%, compared to 73% in fiscal 2019. The company continued to generate losses as it builds out its next-generation revenue-generating capabilities.

Of course, the e-signature market is far from saturated. DocuSign's management estimates the total addressable market for digital signatures is currently about $25 billion. Compare that to the $974 million in revenue the company generated last year, and the opportunity becomes clear. 

Person in suit touching a virtual cloud icon.

Image source: Getty Images.

Even more importantly for investors, Springer said the addition of the Agreement Cloud and acquisitions like Seal Software and SpringCM could potentially double DocuSign's total addressable market to $50 billion, making the resulting opportunity for this growth stock even greater. 

DocuSign has made a name for itself on the back of its e-signature capability, but that could be just the beginning.

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.