The fall from grace of the company during the bear market has been stunning. The e-signature software provider's share price has gone back to pre-COVID levels since climbing above $300 a year ago. - MarketBeat

The company's booster shot up the charts was not a good thing. The recent growth of DocuSign didn't impress investors and they moved on to more exciting growth stories.

With the stock falling back towards its IPO level, investors may want to take a chance on the next ride up. With more downside possible in a weak market, an even more reasonable price could show up in the future. Is Docusign still down?

Growth Goes Backward

The recent earnings figures have declined year-over-year, and this is not the first time that has happened. In the first and second quarters of this year, the bottom line fell due to the growth in earnings. Negative growth can be hard to explain to the market.

Things are going to get worse in the second half. According to Wall Street, the next two quarters will see a decrease in earnings. Before analysts see a return to growth, they have to look all the way out to the first quarter.

Is DocuSign's tools any less relevant than they were during the epidemic? Is paper-based document management still the way to go? Both are false.

Demand seems to have normalized. Global business confidence and activity is highly dependent on DocuSign. Software budgets go down when this weakens, and enterprises decide that they can operate with paper-stuffed file cabinets for longer.

Fundamentals Have Weakened

Dan Springer and Scott Olrich resigned from their positions as COO and CEO, respectively, in June 2022. As it forms a new leadership team, the company is on shaky ground.

Financial statements that look vulnerable will be given to the incoming CEO. The market's primary beef has been below peer growth and negative net margins. At the end of the last quarter, debt made up a majority of the capital structure. It is in the bottom quarter of technology peers. If interest rates go up, it will have to take on more leverage at a higher cost.

The bad news is that it's not as expensive as it used to be. The average tech sector P/E is 25x. The PEG ratio is not compelling compared to its peers.

Unfavorable Macro Environment

Management has made comments about the business activity slowing. Corporate outlooks are affected by inflation, higher rates and supply chain issues, and many would-be customers have limited IT spending.

It's taking more time for the company to attract new customers. In contrast to the early days of COVID-19, when businesses were rushing to get digital signature solutions, a more deliberate sales process has taken over.

The market for e-signatures was created by DocuSign when it launched in 2003 and it is still the leader. Competitive threats have emerged, but the foothold and brand strength of the company have been difficult to change.

Expansion of the Agreement Cloud platform is expected to lead to future growth. It will come from expansion in international markets where the company currently only makes a small amount of money. The company will have to turn to the small business sector to revive growth since it has traditionally focused on large enterprises.

The long-term growth picture is still attractive but a potpourri of near-term headwinds will keep pressure on DocuSign shares for the foreseeable future. This has all the markings of a comeback story, but for now, investors may want to hold off signing any "buy" orders.