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

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

Profitability

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

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

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Switch and DigitalOcean, as reported by MarketBeat.

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

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

Institutional and Insider Ownership

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

Valuation & Earnings

This table compares Switch and DigitalOcean’s revenue, earnings per share (EPS) and valuation.

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

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.

Risk & Volatility

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

Summary

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

Switch Company Profile (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.

DigitalOcean Company Profile (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.

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