In This Article:
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in DocuSign (NASDAQ:DOCU). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is DocuSign Growing Its Earnings Per Share?
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that DocuSign's EPS went from US$0.36 to US$5.27 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of DocuSign shareholders is that EBIT margins have grown from 2.3% to 7.9% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
View our latest analysis for DocuSign
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for DocuSign's future profits.
Are DocuSign Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$18b company like DocuSign. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$185m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Should You Add DocuSign To Your Watchlist?
DocuSign's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, DocuSign is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We should say that we've discovered 2 warning signs for DocuSign that you should be aware of before investing here.