Among leading growth stocks, our IBD 50 Stock To Watch pick for today is DocuSign (DOCU). The firm, which pioneered the development of the eSignature, is finding support at its 10-week moving average. DocuSign is also set to release second-quarter results after the market closes on Sept. 2.
The San Francisco-based company is currently 1% away from its nearest buy point of 290.33 in a consolidation. Shares briefly broke above the buy point on July 6. A quick pullback below the entry stopped just short of triggering the automatic sell rule, leaving the breakout attempt in play. Since then, shares have winked in and out of the buy area, trading just below the proper entry on Monday.
The stock has climbed 29% since Dec. 31. The majority of that rise followed the firm Q1 earnings report on June 3. Shares climbed from around 230 a share to their current price of around 290.
As it tests support at its 10-week line, DocuSign is also presenting a possible follow-on or add-on buy point, a place to add on shares to an existing position. If the stock rebounds off the line in strong volume, shares would technically enter a buy range.
DocuSign shares hold a strong 91 Relative Strength Rating. This indicates the growth stock is outpacing 91% of stocks in IBD’s database. DocuSign also carries a perfect IBD Composite Rating of 99.
Most impressively, the stock shows rising fund ownership for the past 12 straight quarters. Total fund ownership reached a high of 1,665 funds in the most recent quarter.
DocuSign posted quarterly sales of $469 million in its first-quarter report in June. That was up 58% from a year ago. The firm showed a 267% EPS increase, year-over-year, to 44 cents a share. Ideally, CAN SLIM investors want to see year-over-year growth of at least 20% for top growth stocks.
“We’ve increasingly become the way people agree in this emerging anywhere economy — and that’s not only helping organizations continue operations during the pandemic, but helping them realize new and more efficient ways of doing business in the future,” CEO of DocuSign Dan Springer said in the company’s Q1 earnings release in April.
“This fact is reflected by our new and existing customers adopting and expanding at record rates, our 58% year-over-year Q1 revenue growth, and the recent addition of our millionth customer to the DocuSign platform,” he added.
The firm expects 135% year-over-year earnings growth for the upcoming second quarter. Revenue is expected to rise 43% YoY to $488 million. Analysts expect full-year EPS growth of 88% for 2022 and 28% growth in 2023.