DOCU - DocuSign: 33% FCF Margins But Slowing Growth Is A Risk

2024-06-18 00:13:00 ET

Summary

• DocuSign reported better-than-expected first fiscal quarter results, despite slowing top-line growth.
• DOCU is still adding customers to its platform, although the company is still seeing dollar net retention risks.
• Despite challenges in customer monetization, the Company could be an attractive investment due to strong free cash flows and high FCF margins.

DocuSign ( DOCU ) reported better than expected first fiscal quarter results, which were released on June 6, 2024. The e-Signature leader reported slowing top-line growth, which was expected, and also revealed persistent risks to its dollar net retention rate, a key performance metric for software companies. Although DocuSign is facing challenges in terms of customer monetization, I believe the e-Signature company could be an attractive investment due to its strong free cash flows and high margins. In the first fiscal quarter, DocuSign achieved yet again a 30%+ free cash flow margin and while shares are not a completely bargain, I believe it is worth holding on to shares of the e-Signature company....

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