The huge 42% single day drop in DocuSign (DOCU) we discussed last week triggered an insider purchase at the company with the CEO purchasing 34,751 shares worth $4.99 million on the open market. This is the first insider purchase at the company since it went public in April 2018 at $29 per share. The tides have certainly changed as we are now seeing insiders of high-growth companies starting to buy shares after years of mostly selling them.
Just like Asana (ASAN), DocuSign (DOCU) was hit by a deceleration in its growth rate and soft Q4 2022 guidance (fiscal year ends in January 2022). The company reported a 42% year-over-year increase in revenue to $545 million in Q3 2022 and at the midpoint of its guidance of $560 million for Q4 2022, expects to grow revenue 30% year-over-year. The biggest concern beyond the soft Q4 forecast was a decline in billings and the pandemic related tailwinds subsiding.
Unlike Asana, DocuSign generates a significant amount of free cash flow even though net income is consistently negative. For the trailing twelve months ending October 2021, the company generated $419 million in free cash flow. The company was also free cash flow positive pre-pandemic generating $44 million of free cash flow in the twelve months ending January 2020. You probably guessed it that the reason the company is reporting negative net income is on account of very high stock-based compensation. In addition to stock buyback announcements, we also track shares outstanding data from 10-Q and 10-K filings and when I pulled up the shares outstanding data for DocuSign, I was not surprised to see that the company diluted shareholders to the tune of 45% from January 2019 to October 2021 as it focused on growth and issued shares to employees.
DocuSign was trading at a EV/Sales of 23 before the stock took a big hit and now trades for a little below 15 times sales, about the same valuation the market afforded the company pre-pandemic. The market is concerned about slowing revenue growth because the world will gradually return to normalcy after the pandemic. The digitization of documents and e-signatures are secular trends and I don’t see why companies would want to go back to wet signatures even if their workforces return to the office.
The bigger concerns should probably be competition from large companies like Adobe and smaller ones like HelloSign and PandaDoc. DocuSign was founded in 2003 and Adobe acquired EchoSign in 2011 to create its Adobe Sign product, which it launched broadly in 2016. Given how ubiquitous Adobe Acrobat is, I would not be surprised if DocuSign loses market share to Adobe. The good news is that the overall pie for e-signature solutions is growing rapidly and DocuSign has barely made a dent in international sales. In fiscal Q3 2022, the company saw its international sales grow 68% year-over-over and the international segment now represents 23% of overall revenue despite a presence in just a handful of countries. DocuSign is interesting enough that I am going to build a model taking its share dilution into account to see if the company makes sense at current levels.
Welcome to edition 597 of Insider Weekends. Insider buying increased last week with insiders purchasing $192.84 million of stock purchased compared to $181.71 million in the week prior. Selling also increased to $5.63 billion compared to $3.91 billion in the week prior.
Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 29.2. In other words, insiders sold over 29 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 21.5.
Notable Insider Buys:
1. Asana, Inc. (ASAN): $67.91
Shares of this work management platform were acquired by 2 insiders:
- President, CEO, & Chair Dustin A. Moskovitz acquired 1,250,000 shares, paying $71.35 per share for a total amount of $89.19 million. Mr. Moskovitz increased his stake by 21.41% to 7,089,676 shares with this purchase.
- Director Lorrie M. Norrington acquired 3,733 shares, paying $66.51 per share for a total amount of $248,282. Mr. Norrington increased his stake by 4.50% to 86,767 shares with this purchase.
You can view the list of recent insider transactions for Asana, Inc. here.
|P/E: N/A||Forward P/E: -68.6||Industry P/E: 61.77|
|P/S: 37.81||Price/Book: 51.1||EV/EBITDA: -61.24|
|Market Cap: $12.66B||Avg. Daily Volume: 3,433,402||52 Week Range: $25.41 – $145.79|
2. DICK’S Sporting Goods, Inc. (DKS): $113.81
Executive Chairman Edward W. Stack acquired 227,000 shares of this sporting goods retailer, paying $110.30 per share for a total amount of $25.04 million. Mr. Stack increased his stake by 2.10% to 11,035,422 shares with this purchase.
You can view the list of recent insider transactions for DICK’S Sporting Goods, Inc. here.
|P/E: 8.75||Forward P/E: 10.37||Industry P/E: 22.29|
|P/S: 0.82||Price/Book: 3.7||EV/EBITDA: 5.13|
|Market Cap: $9.86B||Avg. Daily Volume: 1,994,811||52 Week Range: $51.51 – $147.39|
3. Continental Resources, Inc. (CLR): $45.92
Director Harold Hamm acquired 117,020 shares of this oil and natural gas exploration and production company, paying $43.33 per share for a total amount of $5.07 million. Mr. Hamm increased his stake by 0.83% to 14,167,237 shares with this purchase.
You can view the list of recent insider transactions for Continental Resources, Inc. here.
|P/E: 20.23||Forward P/E: 7.41||Industry P/E: 18.26|
|P/S: 3.72||Price/Book: 2.41||EV/EBITDA: 6.08|
|Market Cap: $16.79B||Avg. Daily Volume: 1,837,488||52 Week Range: $15.71 – $55.48|
4. DocuSign, Inc. (DOCU): $144.48
President and CEO Daniel D. Springer acquired 34,751 shares of this e-signature solution provider, paying $143.86 per share for a total amount of $4.99 million. These shares were purchased indirectly through a trust.
You can view the list of recent insider transactions for DocuSign, Inc. here.
|P/E: N/A||Forward P/E: 68.47||Industry P/E: 61.77|
|P/S: 14.61||Price/Book: 119.31||EV/EBITDA: 1755.21|
|Market Cap: $28.59B||Avg. Daily Volume: 4,305,234||52 Week Range: $131.51 – $314.76|
5. EverQuote, Inc. (EVER): $15.43
Shares of this online marketplace for insurance shopping were acquired by 2 insiders:
- Director David B. Blundin acquired 148,600 shares, paying $13.91 per share for a total amount of $2.07 million. Mr. Blundin increased his stake by 41.28% to 508,623 shares with this purchase.
- CEO and President Jayme Mendal acquired 10,000 shares, paying $13.07 per share for a total amount of $130,700. Mr. Mendal increased his stake by 4.48% to 233,112 shares with this purchase.
You can view the list of recent insider transactions for EverQuote, Inc. here.
|P/E: N/A||Forward P/E: -23.38||Industry P/E: 27.84|
|P/S: 1.1||Price/Book: 5.3||EV/EBITDA: -35.35|
|Market Cap: $456.48M||Avg. Daily Volume: 398,873||52 Week Range: $11.725 – $54.96|
Notable Insider Sales:
1. Tesla, Inc. (TSLA): $1,017.03
Shares of Tesla were sold by 4 insiders:
- CEO Elon Musk sold 934,091 shares for $1031.18, generating $963.21 million from the sale.
- Chief Financial Officer Zachary Kirkhorn sold 2,652 shares for $980.43, generating $2.6 million from the sale.
- Chief Accounting Officer Vaibhav Taneja sold 1,591 shares for $980.41, generating $1.56 million from the sale.
- SVP Powertrain and Energy Eng. Andrew D. Baglino sold 917 shares for $980.47, generating $899,091 from the sale.
You can view the list of recent insider transactions for Tesla, Inc. here.
|P/E: 332.15||Forward P/E: 124.18||Industry P/E: 25.54|
|P/S: 21.8||Price/Book: 37.74||EV/EBITDA: 139.93|
|Market Cap: $1.02T||Avg. Daily Volume: 25,655,657||52 Week Range: $539.49 – $1243.49|
2. Alphabet Inc. (GOOG): $2973.5
Shares of Alphabet were sold by 3 insiders:
- Director Sergey Brin sold 83,334 shares for $2915.67, generating $242.97 million from the sale.
- Director Lawrence Page sold 83,330 shares for $2953.68, generating $246.13 million from the sale.
- Director John L. Hennessy sold 200 shares for $2939.78, generating $587,955 from the sale. These shares were sold indirectly by a trust.
You can view the list of recent insider transactions for Alphabet Inc. here.
|P/E: 28.65||Forward P/E: 26.46||Industry P/E: 27.84|
|P/S: 8.23||Price/Book: 8.08||EV/EBITDA: 21.83|
|Market Cap: $1.97T||Avg. Daily Volume: 1,165,743||52 Week Range: $1699 – $3037|
3. Walmart Inc. (WMT): $141.03
Director Robson S. Walton sold 2,902,657 shares of Walmart for $138.84, generating $402.99 million from the sale. These shares were sold indirectly by a trust.
You can view the list of recent insider transactions for Walmart Inc. here.
|P/E: 49.66||Forward P/E: 20.99||Industry P/E: 38.54|
|P/S: 0.68||Price/Book: 4.76||EV/EBITDA: 10.79|
|Market Cap: $391.2B||Avg. Daily Volume: 8,041,392||52 Week Range: $126.28 – $152.57|
4. GXO Logistics, Inc. (GXO): $85.78
Director Jacobs S. Bradley sold 3,217,500 shares of this supply chain management solutions provider for $86.40, generating $277.99 million from the sale. These shares were sold indirectly by Jacobs Private Equity, LLC.
You can view the list of recent insider transactions for GXO Logistics, Inc. here.
|P/E: 78.7||Forward P/E: 32.87||Industry P/E: N/A|
|P/S: 1.32||Price/Book: 4.28||EV/EBITDA: 22.68|
|Market Cap: $9.83B||Avg. Daily Volume: 708,901||52 Week Range: $61.05 – $105.92|
5. XPO Logistics, Inc. (XPO): $75.72
Chief Executive Officer Jacobs S. Bradley sold 3,217,500 shares of this supply chain management solutions provider for $74.21, generating $238.77 million from the sale. These shares were sold indirectly by Jacobs Private Equity, LLC.
You can view the list of recent insider transactions for XPO Logistics, Inc. here.
|P/E: 29.03||Forward P/E: 16.08||Industry P/E: 37.13|
|P/S: 0.47||Price/Book: 8.57||EV/EBITDA: 8.01|
|Market Cap: $8.69B||Avg. Daily Volume: 1,280,606||52 Week Range: $70.29 – $153.45|
You can view the full list of sales from this Insider Sales page.
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