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Assessing DocuSign (DOCU) Valuation As Slower ARR Growth Fuels Questions On Future Demand

Simply Wall St · 3d ago

Recent commentary around DocuSign (DOCU) centers on softer annual recurring revenue growth of 8.4% and forecasts for roughly 6.7% growth, which have raised fresh questions about long-term demand and customer commitment.

See our latest analysis for DocuSign.

Those concerns around softer annual recurring revenue growth are showing up in the share price, with DocuSign trading at US$65.19 after a 1 day share price return of 1.32% but a 1 year total shareholder return decline of 26.14%, suggesting momentum has faded compared with its 3 year total shareholder return of 12.30%.

If DocuSign's slower ARR has you reassessing your tech exposure, this could be a useful moment to look across other high growth tech and AI names using high growth tech and AI stocks.

With revenue growing 6.5%, net income increasing 14.4% and the stock trading about 35% below one intrinsic estimate and roughly 31% below the average analyst target, is this weakness a buying opportunity or is future growth already priced in?

Most Popular Narrative: 24.6% Undervalued

The most followed narrative sees DocuSign’s fair value at about US$86.50 versus the last close of US$65.19, framing the current price as a sizeable discount.

Operational efficiency initiatives, including automation, cloud migration, AI-driven R&D investment, and measured hiring, are sustaining strong free cash flow generation. This supports robust capital returns (e.g., buybacks) and sets the stage for net margin and EPS expansion as cloud migration costs ease in the coming fiscal year.

Read the complete narrative.

Curious how modest revenue growth, thicker margins, and a richer future earnings multiple are combined to justify that uplifted value? The full narrative connects these moving parts in detail.

Result: Fair Value of $86.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, those assumptions could unravel if revenue growth keeps slowing or if competition in e-signature and AI agreement tools pressures pricing and margins more than expected.

Find out about the key risks to this DocuSign narrative.

Another View: What The P/E Ratio Is Signalling

The narrative fair value of about US$86.50 points to DOCU looking 24.6% undervalued, but the P/E ratio tells a tighter story. DOCU trades on 43.2x earnings versus a fair ratio of 32.8x and a US software industry average of 32.7x, so the shares look expensive on this yardstick. Is the market overpaying for quality, or are earnings assumptions in the narrative too cautious?

See what the numbers say about this price — find out in our valuation breakdown.

NasdaqGS:DOCU P/E Ratio as at Jan 2026
NasdaqGS:DOCU P/E Ratio as at Jan 2026

Build Your Own DocuSign Narrative

If you are not convinced by this view or prefer to evaluate the numbers yourself, you can build a tailored thesis in minutes with Do it your way.

A great starting point for your DocuSign research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If DocuSign has sharpened your thinking, do not stop here. Broaden your watchlist with fresh angles so you are not relying on a single story.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.