DOCUSIGN, INC. (DOCU) stock intrinsic value fair value estimate & owner earnings analysis

Docusign is the leading electronic-signature company and is extending that franchise into a broader Intelligent Agreement Management (IAM) platform for creating, signing, acting on and storing contracts. Almost all revenue is subscription. As of January 31, 2026 it had over 1.8 million customers, including about 280,000 served by its direct sales force (up from about 260,000 a year earlier). About 71% of revenue comes from the United States and 29% from abroad, where revenue grew 13% last year. Revenue growth has slowed from the 40%+ pandemic years to about 8% in fiscal 2025 and fiscal 2026 and about 9% in the first half of fiscal 2027. How we measure earnings, and why this estimate is much lower than our previous one. We start from operating cash flow. We strip out working-capital swings and charge stock compensation as a real cost. We count only the capital spending needed to maintain the business. We made three corrections to our earlier work. (1) Docusign pays large sales commissions (about $271 million last year) up front and spreads the expense over several years. Our earlier figures dropped that cash as a timing item and also added back the expense, so this recurring cost was never counted. (2) Office rent was missed the same way. (3) About $51 million a year of stock pay for software engineers is capitalized rather than expensed, and it also escaped the charge. All three are now counted. On this corrected basis, owner earnings were about $0.30 per share in fiscal 2024, $1.01 in fiscal 2025 and $1.36 in fiscal 2026, against $2.99 for fiscal 2026 on the old basis. The large $840 million tax benefit booked in fiscal 2025 was an accounting entry, not cash, and has no effect on these figures. Debt and cash. Docusign has no borrowings. Its $750 million credit line (maturing May 2030) is undrawn, and it repaid its convertible notes in fiscal 2024. At July 31, 2026 it held about $973 million of cash and investments. We treat about $200 million as needed to run the business and add the remaining $773 million (about $4.00 per share) to every case. Our previous estimate did not add this cash, but it did include the interest the cash earns (about $49 million last year). We now leave that interest out of the earnings stream and count the cash once, on the balance sheet. Because there is no debt, the business value and the shareholders' value differ only by that net cash. Starting point. Fiscal 2026 was the first full year after the 2024 and 2025 restructurings were finished. Excluding interest income, it produced about $235 million of owner earnings, 43% more than fiscal 2025's $164 million. For fiscal 2027 we assume about $337 million, the same 43% growth rate and no faster. The first half already supports this: cash earnings excluding interest were about $172 million, compared with about $97 million a year earlier, as operating expenses held flat while revenue rose 9% and stock compensation fell. We do not assume any further margin gains after that. Taxes. Docusign pays almost no cash tax today because it is using $1.8 billion of federal tax losses carried forward from earlier years. At about $450-500 million of pre-tax income a year, and with the law letting those losses offset only 80% of taxable income, they run out around fiscal 2031. From fiscal 2032 every case pays a normal cash tax rate, which reduces owner earnings by about a quarter. Bear case (about $15.64 per share). Docusign's own filings warn that large-language-model providers, hyperscalers and general-purpose AI agents could replace functions customers now buy from it. In this case that happens: revenue growth slows from 3% to zero by fiscal 2031 and then shrinks 3% a year, price pressure cuts the profit margin by about a fifth, and after year ten the remaining earnings fade to nothing over another decade. Business worth about $2.25 billion, no debt, plus $0.77 billion of surplus cash: about $3.02 billion. Base case (about $28.63 per share). Growth continues below its recent rate, backed by a subscription base that kept growing through the 2022-2024 slowdown: 7% in fiscal 2028, easing to 3% by fiscal 2033 and holding there through fiscal 2036. Margins stay at the level already reached. The tax step-up arrives in fiscal 2032. After year ten, earnings hold flat for a decade on the strength of the installed customer base and its workflow integrations, then fade to zero over 15 years. We assume no permanent growth, because we cannot point to evidence that e-signature keeps its earning power indefinitely against AI substitutes. Business worth about $4.76 billion, no debt, plus $0.77 billion of cash: about $5.53 billion. Bull case (about $34.30 per share). Revenue keeps growing at its recent 8-9% pace for three years as IAM, which is already shipping, sells into the existing base, then eases to 4% by fiscal 2036. Earnings hold flat for 15 years after year ten before fading. We did not assume further margin expansion or permanent growth in any case, because neither is secured today. Business worth about $5.85 billion, no debt, plus $0.77 billion of cash: about $6.62 billion. What moved. Most of the drop from our previous estimate (about $149 per share in the base case) comes from four things: the commission, rent and capitalized-stock-pay costs now counted; the removal of a permanent 3% growth assumption; the future loss of the tax shield; and interest income moving out of earnings and into the cash balance. Adding the cash raised the estimate by about $4 per share. The stronger first half of fiscal 2027 raised the starting level. What would make this wrong. On the upside: if the fall in stock compensation and the flat cost base keep lifting margins, or IAM restores double-digit growth, value would be well above the bull case, but none of that is secured today. On the downside: AI tools that make stand-alone e-signature a free feature would push results toward the bear case. Not everything reconciles exactly. Our fiscal 2027 half-year figures come from the quarterly filing's summary data rather than a full cash-flow walk, so small reconciling items may be missing.