Disruptive and dynamic companies are more essential now than they were a year ago, when the Fed was still pumping so much liquidity into the system that even the most speculative stocks were soaring, explains Hilary Kramer, editor of GameChangers.

Now, the fundamentals have started to matter again and I’m feeling increasingly positive about our end of the market lately. We may still need to weather a little more gloom, but as long as the portfolio as a whole resists the worst of the selling we’re well positioned to reap the ultimate rewards.

Meanwnhile, we've see afresh opportunities emerge from the September wreckage that made it possible for us to buy high-flying DocuSign (DOCU) at a reasonable price. Employment offers, signed contracts and covenants are a part of modern business. That is where DocuSign is changing the game with the world’s leading electronic signature platform.

DOCU’s solutions have been a huge success, saving invaluable time and money while reducing errors for over 1.1 million users worldwide. The firm offers its products through The DoucSign Agreement Cloud, a cloud platform containing a suite of applications that span the entire agreement process.

DOCU has seen significant top-line growth in recent years. Revenues quadrupled from the $518 million in the January 2018 fiscal year to $2.017 billion in the January 2022 fiscal year. However, this proved to be a double-edged sword for shareholders. The stock soared after its April 2018 IPO, which was priced at $29 and the first public trade occurring at $38. By September of last year, the stock reached $314.

We now know that the pandemic pulled a lot of projected demand forward, but the DOCU management team failed to realize this at the time and kept spending money to support an unrealistic growth trajectory. As it is, revenue is on track to grow 17% in the current fiscal year, which is good enough to qualify as a GameChanger stock but a big step down from the 45-9% annualized expansion rates the company enjoyed in the pandemic.

Between the slowing top line and the expanded expense structure, EPS is likely to decline about 17% to $1.65 this year . . . but the stock has cratered in response and is now “only” 33% above its first post-IPO price. A new CEO is at the helm planning to cut 9% of the workforce, which should take pressure off the margins.

As it is, DOCU is now attractively valued at 28X forward earnings and 4X forward revenue. If anything, the company is now a potential takeover candidate at this price. Keep in mind that the new CEO has a venture capital background and cutting payroll may be part of preparing the company for sale.

In the meantime, while growth will not approach COVID levels in the foreseeable future, the subscription model supports a strong recurring revenue base for opportunistic expansion overseas (now just 22% of all sales) and into deeper relationships with customers in specific industry verticals, such as health care and financial services. DocuSign is a buy below $55. My target is $68.

Subscribe to GameChangers here…