Reviewing Vertex (NASDAQ:VERX) and DigitalOcean (NYSE:DOCN)

Vertex (NASDAQ:VERX) and DigitalOcean (NYSE:DOCN) are both mid-cap computer and technology companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, analyst recommendations, risk, institutional ownership and dividends.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Vertex	-6.45%	28.14%	5.41%
DigitalOcean	13.46%	-60.69%	8.41%

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Vertex and DigitalOcean, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Vertex	0	4	9	1	2.79
DigitalOcean	1	6	6	0	2.38

Vertex currently has a consensus price target of $50.50, suggesting a potential upside of 44.33%. DigitalOcean has a consensus price target of $39.83, suggesting a potential upside of 42.98%. Given Vertex’s stronger consensus rating and higher probable upside, equities analysts plainly believe Vertex is more favorable than DigitalOcean.

Insider and Institutional Ownership

70.3% of Vertex shares are owned by institutional investors. Comparatively, 49.8% of DigitalOcean shares are owned by institutional investors. 43.3% of Vertex shares are owned by company insiders. Comparatively, 1.0% of DigitalOcean shares are owned by company 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.

Earnings & Valuation

This table compares Vertex and DigitalOcean”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Vertex	$687.06 million	8.07	-$52.73 million	($0.29)	-120.66
DigitalOcean	$806.59 million	3.14	$84.49 million	$1.11	25.10

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

Volatility & Risk

Vertex has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500. Comparatively, DigitalOcean has a beta of 1.79, meaning that its share price is 79% more volatile than the S&P 500.

Summary

Vertex beats DigitalOcean on 8 of the 15 factors compared between the two stocks.

About Vertex

Vertex, Inc., together with its subsidiaries, provides enterprise tax technology solutions for retail trade, wholesale trade, and manufacturing industries in the United States and internationally. The company offers tax determination; compliance and reporting, including workflow management tools, role-based security, and event logging; tax data management; document management; analytics and insights; pre-built integration that includes mapping data fields, and business logic and configurations; industry-specific solutions; and technology specific solutions, such as chain flow accelerator and SAP-specific tools. It provides implementation services, such as configuration, data migration and implementation, and support and training; and managed services, including tax return preparation, filing and tax payment, and notice management. The company sells its software products through software licenses and software as a service subscription. Vertex, Inc. was founded in 1978 and is headquartered in King of Prussia, Pennsylvania.

About DigitalOcean

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.