Comparing DigitalOcean (NYSE:DOCN) and Tucows (NASDAQ:TCX)

Tucows (NASDAQ:TCX) and DigitalOcean (NYSE:DOCN) are both technology companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, profitability, institutional ownership, dividends, earnings, analyst recommendations and valuation.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Tucows	-17.91%	N/A	-8.22%
DigitalOcean	3.11%	15.01%	4.27%

Institutional and Insider Ownership

73.6% of Tucows shares are owned by institutional investors. Comparatively, 49.8% of DigitalOcean shares are owned by institutional investors. 8.4% of Tucows shares are owned by company insiders. Comparatively, 1.0% of DigitalOcean shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Tucows has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500. Comparatively, DigitalOcean has a beta of 1.69, meaning that its share price is 69% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Tucows and DigitalOcean, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tucows	1	0	0	0	1.00
DigitalOcean	1	1	14	2	2.94

DigitalOcean has a consensus price target of $141.06, suggesting a potential upside of 63.60%. Given DigitalOcean’s stronger consensus rating and higher possible upside, analysts clearly believe DigitalOcean is more favorable than Tucows.

Valuation & Earnings

This table compares Tucows and DigitalOcean”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tucows	$390.30 million	0.34	-$75.82 million	($6.37)	-1.84
DigitalOcean	$901.43 million	11.29	$259.26 million	$0.31	278.14

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

Summary

DigitalOcean beats Tucows on 13 of the 15 factors compared between the two stocks.

About Tucows

Tucows is an internet services and technology company founded in 1993. Its businesses include domain name services, broadband internet and software for communications service providers. Through Tucows Domains, the company provides domain registration and related services to businesses and consumers. Its brands include OpenSRS, which serves resellers, and Hover, a retail domain and email provider. Tucows serves customers and partners internationally through its domain business. Tucows also operates Ting Internet, a fiber broadband provider serving communities in the United States, and Wavelo, which develops software for telecommunications providers, including tools for managing subscribers and billing.

About DigitalOcean

DigitalOcean Holdings, Inc. provides cloud computing services designed primarily for developers, startups, and small and midsize businesses. Founded in 2011, the company focuses on making it easier for customers to build, deploy, and scale applications without managing their own physical infrastructure. Its platform includes virtual machines known as Droplets, managed Kubernetes, an application platform, managed databases, object storage, and networking and monitoring tools. These services support tasks ranging from hosting websites and applications to developing and running cloud-native software.