After turbocharged growth in 2021, the Nasdaq Composite has fallen sharply as investors have weighed concerns regarding inflation. In fact, the growth-heavy index recently fell more than 20% from its high, meaning it entered bear market territory (it's currently down about 18%). But many individual stocks have fallen much further. For instance, DocuSign (DOCU 1.56%) and Globant (GLOB 0.39%) have dropped 73.8% and 27%, respectively, from their all-time highs.
However, those companies play a key role in the digital transformation (DX) sector, and DX spend is expected to grow from $1.8 trillion in 2022 to $2.8 trillion by 2025, according to the International Data Corp. Better yet, shares of DocuSign and Globant look relatively cheap compared to their historical valuations, meaning investors have a chance to buy these stocks on sale.
Here's what you should know about these two beaten-down growth stocks.
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1. DocuSign
Agreements are the lifeblood of any business. Departments like sales, finance, and human resources are built on agreements with customers, partners, and employees. Unfortunately, the traditional paper-based processes used to generate contracts, capture signatures, and take action on agreements are time-consuming, complicated, and prone to error. That's where DocuSign can make a difference.
Its platform -- the Agreement Cloud -- is built around DocuSign eSignature, a tool that allows clients to capture legally valid signatures on digital documents. As a pioneer in the industry, DocuSign has become the gold standard, and it holds over 70% market share. But over the years, its platform has expanded to include tools for automated contract generation, AI-powered analytics, electronic notarization, and digital payments. And those tools integrate with over 350 third-party technologies, including productivity platforms like Microsoft 365 and customer relationship management software like Salesforce.
Collectively, DocuSign's robust product portfolio and its broad set of integrations have fueled a strong financial performance. Over the past year, revenue rose 45% to $2.1 billion and free cash flow skyrocketed 107% to $445.1 million. Better yet, despite guidance that disappointed Wall Street, the company is well-positioned for future growth.
DocuSign currently boasts a net promoter score (NPS) of 72. NPS is designed to measure the customer experience, and a score of 50 is considered excellent, while a score of 70 (or higher) ranks as world-class. In other words, DocuSign has developed a great rapport with its customers. Even so, the company has captured just 4% of its $50 billion addressable market, leaving plenty of room for future growth. And with shares trading at 6.9 times sales -- far cheaper than their three-year average of 21.9 times sales -- now looks like a good time to buy this growth stock.
2. Globant
Globant provides IT consulting and product engineering services. The company helps its clients put their digital transformation projects into motion, whether that means rethinking product strategies, improving the customer experience, or implementing new technologies. To do that, Globant employs over 22,000 IT professionals with a broad range of expertise, from artificial intelligence and cloud computing to digital marketing and video game development.
Globant's broad knowledge base has helped it win an array of blue-chip clients, including Coca-Cola, Alphabet's Google, and Walt Disney. Better yet, the company grew its clientele 42% to 1,138 last year, and 185 of those customers spent over $1 million in the last 12 months, up 43% from 2020. Not surprisingly, that translated into impressive financial results. Over the past year, revenue rose 59% to $1.3 billion, and earnings soared 67% to $2.28 per diluted share.
Looking ahead, the company puts its addressable market at $154billion in 2022, and management is working to capitalize on that opportunity through geographic expansion and its 100 squared growth strategy. Specifically, Globant prioritizes the top 100 accounts in terms of potential, aiming to build lasting relationships with the clients that could eventually generate $100 million (or more) in revenue.
So far, that strategy is working. Research company Everest Group ranked Globant among the five fastest-growing engineering services providers in the world last year. As enterprises continue to invest in digital transformation in the years ahead, Globant is well-positioned to maintain that momentum. And with the stock trading at a reasonable 7.6 times sales -- lower than its three-year average of 8.3 times sales -- this looks like a buying opportunity for long-term investors.
