Artificial intelligence (AI) stocks have been red-hot over the past year, and for good reason, given the technology's potential to transform the economy and boost productivity. But there are still fantastic opportunities available outside the AI space, and investors might be overlooking them.
Bill Holdings (BILL 1.41%) develops payment software for small and mid-size businesses, and it has an incredible addressable market in front of it. DocuSign (DOCU 0.09%) was a pandemic darling that investors have since tossed aside, but it's trading at a very attractive valuation right now.
Here's why it might be time to pounce on these two stocks.
NYSE: BILL
Key Data Points
1. Bill Holdings
Bill Holdings went public in 2019, and its stock soared more than 15-fold within two years to an all-time high of $334. The company was growing its revenue by triple-digit percentages, which drove investors into a frenzy, but that growth has since slowed, and the stock has declined 80% from its record high.
Bill has a portfolio of software products designed to streamline the accounts payable, accounts receivable, and budgeting processes for small and mid-size businesses. Its flagship Bill.com tool is a digital inbox that businesses can use to receive and upload invoices, with a function that allows them to pay bills with a single click. It's great for keeping track of cash flow and eliminating messy paper trails.
Last month, Bill.com announced the integration of powerful predictive cash-flow tools into its existing products. They can analyze historical accounting data to provide businesses with future forecasts, which eliminates uncertainty and helps them plan for different scenarios.
As of the fiscal 2024 second quarter (ended Dec. 31), Bill Holdings had 473,500 customers. The company has partnerships with more than 7,000 accounting firms, which recommend its software to their business clients, because accountants' jobs are far easier when their clients' financial records are neatly organized -- it's a win-win for all parties.
Bill Holdings is on track to deliver a record $1.2 billion in revenue during fiscal 2024 (ending June 30). But that would be a year-over-year growth rate of just 17%, a sharp deceleration from its fiscal 2023 revenue growth of 65%. The company invested heavily in growth and generated large losses since going public, but it's now focusing on managing costs to improve its bottom line.
The strategy appears to be working. Through the first two quarters of fiscal 2024, the net loss came in at just $68.2 million, a 61% reduction from the year ago.
The company's modest growth might stick around in the near term while it progresses toward profitability, but over the long term, Bill Holdings is trying to capture an addressable market that includes over 70 million businesses around the world. This stock might be a great buy for investors who can hold on for the next few years, especially at its heavily discounted price right now.
NASDAQ: DOCU
Key Data Points
2. DocuSign
DocuSign stock was cast aside by investors once the worst of the pandemic was over, and it's currently trading 80% below its all-time high. To be clear, the company has faced challenges like slowing revenue growth, but it also made significant progress in other areas, including profitability.
DocuSign is the leader in e-signature technology, but it serves businesses at all stages of the contract life cycle through its Agreement Cloud, which is home to over a dozen different applications. Businesses can draft contracts, negotiate them, and close them entirely online, without having to physically meet the other parties involved.
DocuSign also offers AI capabilities through its Insight application, which can be trained to identify problematic contract clauses and even potential opportunities. The company is trying to expand its AI product portfolio through its AI Labs division, where it allows select customers to experiment with new applications and offer feedback. It will use that information to decide which AI tools to release to the broader market.
The company just wrapped up its 2024 fiscal year (ended Jan. 31), and it delivered a record $2.8 billion in revenue. But that represented year-over-year growth of just 9.8%, marking a deceleration from fiscal 2023, when it grew its revenue by 19.4%.
DocuSign has pulled back on its aggressive expenditures on growth-focused line items like marketing, in favor of delivering profitability. As a result, the company generated its first-ever annual profit in fiscal 2024 with net income of $73.9 million.
Even better, on an adjusted basis, which strips out one-off and noncash expenses like stock-based compensation, DocuSign's net income soared by 48.7% to $622.9 million.
That translates to $2.98 in adjusted earnings per share, which places the stock at a price-to-earnings (P/E) ratio of just 20.1. That's a 33% discount to the Nasdaq-100 index, so DocuSign is much cheaper than the broader technology sector.
Shares look even more attractive when you consider the company is chasing a $50 billion addressable market for its technology. DocuSign stock probably won't return to its all-time high of $310 anytime soon, but there is a clear case for upside from where it trades today.
