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At first glance, small investors looking for a millionaire-maker stock might find themselves considering Docusign (NASDAQ: DOCU). The pandemic darling, which once exceeded $310 per share, now sells at a discount of over 80% from its all-time high. Also, since it ended the need for in-person document signing, it has had a game-changing effect on a critical industry.

Nonetheless, its success attracted some notable competitors, which has likely hampered the stock's ability to recover. Docusign has leaned into artificial intelligence (AI) to bolster its competitive advantage, but is that enough to strengthen the stock's potential for massive growth?

Where Docusign stands

Admittedly, the bears are likely right to question Docusign's potential amid its competition. The company must now deal with Adobe and others as competitors.

Adobe's market cap is around $245 billion compared to just $11 billion for Docusign. Also, Adobe created the PDF document format, and given its extensive portfolio of popular software franchises, one is right to question whether Docusign can compete longer term.

Still, given the sensitivity of documentation, many customers might prefer a document specialist over a more general software company like Adobe.

Additionally, Docusign has used AI to develop what it calls intelligent agreement management (IAM). IAM manages the end-to-end processes and uncovers actionable insights such as changing conditions or contract expirations to keep documents current. Deloitte estimates that poor agreement management costs organizations an estimated $2 trillion per year in global economic value, so it is easy to see the potential of such a system.

However, Adobe already offers some of this functionality in some of its systems. Also, given its size and resources, one should not assume that it or other competitors will not develop similar products.

Docusign's financials

Also, even if IAM is a success, the financials will probably have to improve for Docusign stock to mint a large number of millionaires. In the first quarter of fiscal 2025 (ended April 30), revenue of $710 million rose by only 7% year over year. Also, since annual revenue growth was 10% in fiscal 2024, the fiscal Q1 rate is underperforming recent averages.

The growth has expanded its profits. In fiscal Q1, its net income of $34 million grew from the $539,000 profit reported in the same year-ago quarter.

Still, the company forecasts $2.925 billion in revenue at the midpoint for fiscal 2025, an increase of only 4% if that prediction holds.

Indeed, investors may pile in to the stock anyway amid its forward P/E ratio of 17. Also, the price-to-sales (P/S) ratio of 4, which has bounced off record lows, confirms its status as a value stock. If Docusign's IAM can help it bolster growth, investors could earn significant returns.

Is Docusign a millionaire maker?

Docusign's low valuation, profitability, and AI-driven functions could help it generate outsize returns. However, it does not appear to drive enough growth to help small investors become millionaires in the software-as-a-service (SaaS) stock.

Indeed, it is a value stock driven by an innovative product that many organizations will find valuable. That could drive enough growth for Docusign to beat the market.

Unfortunately, large companies can and do compete in this business, significantly undermining its growth potential. Such pressures dramatically reduce the likelihood that Docusign will turn small investors into millionaires.

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Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe and Docusign. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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