DocuSign Is Severely Overvalued - DocuSign, Inc. (NASDAQ:DOCU)
Not surprisingly, the pricing structure among these firms tells a similar story, with DocuSign and AdobeSign offering identical plans, while the rest of the group attempts to lure customers with schemes on a lower price level (here, here, and here). Growth - According to two different and independent studies conducted in 2017 on global digital signature market (Stratistics MRC and P&S Market Research), there is a potential to reach $3.2bln (up from $662.4mln in 2016) and $2.9bln, respectively, by 2023. For DOCU, the estimated market size of $662.4 translates into 35% market share in 2016 and slightly above 40% in 2017, which is in line with the abovementioned figure by Forrester. Assuming DOCU maintains its market share at 40%, the 5-year CAGR can be computed to be 22% and 19%, respectively. Sustainable growth = ROIC * reinvestment rate. And assuming that this rate during the terminal period is equal to 3% (10-year Treasury rate), with an ROIC of 12% (which assumes the company will be able to sustain its competitive advantage in the long-term by achieving returns in excess of the terminal period WACC), the reinvestment rate in the terminal period can be calculated as:. This time, however, given a wide discrepancy between value per share and the market price, the boundaries of stress testing the assumptions will be severely relaxed; more specifically, instead of applying various distribution assumptions (such as triangular or normal distributions with low extreme event probabilities of occurrence) for each key variable, uniform distribution will be used, with equal likelihood of occurrence, for revenue (in the range of 15-45% [the upper bound is even higher than 2018 sales growth rate of 39% and slightly below 2017 figure of 52%]), operating margin (20-40%), and reinvestment (1.0-3.0) assumptions.