Analyzing DigitalOcean (DOCN) and Its Rivals

DigitalOcean (NYSE:DOCN) is one of 272 public companies in the “IT Services” industry, but how does it compare to its rivals? We will compare DigitalOcean to similar companies based on the strength of its valuation, dividends, institutional ownership, risk, earnings, profitability and analyst recommendations.

Earnings and Valuation

This table compares DigitalOcean and its rivals revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
DigitalOcean	$1.01 billion	$259.26 million	40.71
DigitalOcean Competitors	$3.30 billion	$227.70 million	-31.47

DigitalOcean’s rivals have higher revenue, but lower earnings than DigitalOcean. DigitalOcean is trading at a higher price-to-earnings ratio than its rivals, indicating that it is currently more expensive than other companies in its industry.

Profitability

This table compares DigitalOcean and its rivals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
DigitalOcean	23.26%	31.01%	5.76%
DigitalOcean Competitors	-191.25%	-37.18%	-8.67%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for DigitalOcean and its rivals, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DigitalOcean	0	2	14	2	3.00
DigitalOcean Competitors	1983	5636	9413	346	2.47

DigitalOcean presently has a consensus price target of $150.69, suggesting a potential upside of 69.03%. As a group, “IT Services” companies have a potential upside of 23.78%. Given DigitalOcean’s stronger consensus rating and higher probable upside, analysts plainly believe DigitalOcean is more favorable than its rivals.

Risk & Volatility

DigitalOcean has a beta of 1.7, suggesting that its share price is 70% more volatile than the S&P 500. Comparatively, DigitalOcean’s rivals have a beta of 2.12, suggesting that their average share price is 112% more volatile than the S&P 500.

Insider & Institutional Ownership

49.8% of DigitalOcean shares are owned by institutional investors. Comparatively, 36.7% of shares of all “IT Services” companies are owned by institutional investors. 1.0% of DigitalOcean shares are owned by company insiders. Comparatively, 20.4% of shares of all “IT Services” companies are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

DigitalOcean beats its rivals on 10 of the 13 factors compared.

DigitalOcean Company Profile

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. The company’s platform provides on-demand infrastructure and platform tools for developers, start-ups, and small and growing digital businesses. It also offers infrastructure-as-a-service (IaaS) solutions comprising compute and storage services, as well as networking projects, including Cloud Firewalls software, Managed Load Balancers software, and Virtual Private Cloud (VPC). The company also provides platform-as-a-service (PaaS) solutions, such as managed databases; managed Kubernetes and container registry; application platform to build, deploy, and scale applications; Functions, a serverless compute solution; and Uptime for real-time uptime and latency alerts, as well as software-as-a-service (SaaS), including managed hosting and DigitalOcean Marketplace, a platform where developers can find pre-configured applications and solutions. In addition, it offers artificial intelligence (AI)/machine learning (ML) applications comprising GPU virtual machines for scaling AI applications; Notebooks, a simple cloud workspace that runs on GPUs that provides a managed interactive development environment for exploring data, and training and building machine learning models; and Deployments for deploying their machine learning model as an API endpoint. The company’s customers include software engineers, researchers, data scientists, system administrators, students, and hobbyists. Its customers use its platform in various industry verticals and for a range of use cases, such as web and mobile applications, website hosting, e-commerce, media and gaming, personal web projects, managed services, and AI/ML applications. DigitalOcean Holdings, Inc. was incorporated in 2012 and is headquartered in New York, New York.