Reviewing DigitalOcean (NASDAQ:DOCN) and Switch (NYSE:SWCH)

DigitalOcean (NASDAQ:DOCNGet Rating) and Switch (NYSE:SWCHGet Rating) are both mid-cap computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Earnings and Valuation

This table compares DigitalOcean and Switch’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DigitalOcean $428.56 million 10.48 -$19.50 million ($0.32) -132.37
Switch $592.04 million 13.68 $5.41 million $0.04 828.21

Switch has higher revenue and earnings than DigitalOcean. DigitalOcean is trading at a lower price-to-earnings ratio than Switch, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares DigitalOcean and Switch’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DigitalOcean -7.42% -5.00% -2.33%
Switch 1.05% 2.81% 0.61%

Institutional & Insider Ownership

62.0% of DigitalOcean shares are owned by institutional investors. Comparatively, 51.3% of Switch shares are owned by institutional investors. 4.1% of DigitalOcean shares are owned by insiders. Comparatively, 29.2% of Switch shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for DigitalOcean and Switch, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DigitalOcean 0 1 8 0 2.89
Switch 0 11 3 0 2.21

DigitalOcean currently has a consensus price target of $63.50, suggesting a potential upside of 49.91%. Switch has a consensus price target of $30.48, suggesting a potential downside of 7.98%. Given DigitalOcean’s stronger consensus rating and higher probable upside, analysts plainly believe DigitalOcean is more favorable than Switch.

Volatility & Risk

DigitalOcean has a beta of 1.86, suggesting that its share price is 86% more volatile than the S&P 500. Comparatively, Switch has a beta of 0.71, suggesting that its share price is 29% less volatile than the S&P 500.

Summary

Switch beats DigitalOcean on 9 of the 14 factors compared between the two stocks.

About DigitalOcean (Get Rating)

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. Its platform provides on-demand infrastructure and platform tools for developers, start-ups, and small and medium size businesses. The company offers infrastructure solutions across compute, storage, and networking, as well as enables developers to extend the native capabilities of its cloud with fully managed application, container, and database offerings. Its users include software engineers, researchers, data scientists, system administrators, students, and hobbyists. The company's 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 others. DigitalOcean Holdings, Inc. was incorporated in 2012 and is headquartered in New York, New York.

About Switch (Get Rating)

Switch, Inc., through its subsidiary, Switch, Ltd., provides colocation space and related services. It develops and operates data centers in Nevada, Michigan, and Georgia. The company serves technology and digital media companies, financial institutions, government agencies, and network and telecommunications providers, as well as cloud, IT, and software providers. Switch, Inc. was founded in 2000 and is headquartered in Las Vegas, Nevada.

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