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Why DocuSign Stock Popped Today

By Rich Smith – Sep 3, 2021 at 3:58PM

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DocuSign beat earnings in the second quarter, and promised to keep on beating 'em all year long.

What happened

Shares of cloud-based e-signature company DocuSign (DOCU -0.69%) are up 5.5% as of 3:30 p.m. EDT Friday, after reporting a sizable earnings beat last night.

Heading into earnings, analysts had forecast DocuSign would earn $0.40 per share (pro forma) on sales of $487.5 million in the second quarter of 2021. As it turned out, DocuSign actually earned $0.47 per share, and on sales of $511.8 million.  

Green arrow trending up over the numerals 2021.

Image source: Getty Images.

So what

Those sales, by the way, were up 50% year over year, and recurring subscription revenue grew even faster -- up 52%. Gross profit margin on that revenue increased 4 full percentage points to 78%.  

With stronger gross profit margins and rising sales, DocuSign managed to cut its loss per share according to generally accepted accounting principles (GAAP) to just $0.13, down from a $0.35-per-share loss in the year-ago quarter -- still not as good as the $0.47 management claimed for its adjusted income but definitely an improvement.

And finally, the best news of all: Free cash flow at the company surged ahead 62% in comparison to last year. These actual cash profits for the company totaled $161.7 million.

Now what

And the news could get even better. In laying out new guidance for the coming quarter and for the full year, DocuSign said it expects revenue to rise to between $526 million and $532 million in the third quarter (Wall Street was only expecting $521 million), and to approximately $2.08 billion for the full fiscal year (Wall Street says $2.05 billion).  

Management did not say what it expects to earn, either for the quarter or the year. But with revenue looking very likely to exceed expectations all year long, it's a good bet that earnings will look pretty strong as well.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends DocuSign. The Motley Fool has a disclosure policy.

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