Please ensure Javascript is enabled for purposes of website accessibility

Why DocuSign Stock Popped Today

By Rich Smith – Sep 3, 2021 at 3:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

DocuSign Stock Quote
DocuSign
DOCU
$46.03 (-0.69%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
360%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.