Critical Analysis: DigitalOcean (NYSE:DOCN) & PubMatic (NASDAQ:PUBM)

DigitalOcean (NYSE:DOCN) and PubMatic (NASDAQ:PUBM) are both computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, valuation and profitability.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
DigitalOcean	10.86%	-43.11%	7.64%
PubMatic	5.96%	6.12%	2.58%

Volatility and Risk

DigitalOcean has a beta of 1.87, suggesting that its share price is 87% more volatile than the S&P 500. Comparatively, PubMatic has a beta of 1.5, suggesting that its share price is 50% more volatile than the S&P 500.

Institutional and Insider Ownership

49.8% of DigitalOcean shares are held by institutional investors. Comparatively, 64.3% of PubMatic shares are held by institutional investors. 0.7% of DigitalOcean shares are held by insiders. Comparatively, 2.9% of PubMatic shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
DigitalOcean	$780.62 million	3.38	$19.41 million	$0.87	32.92
PubMatic	$291.26 million	1.37	$8.88 million	$0.23	35.87

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

Analyst Ratings

This is a summary of current ratings and target prices for DigitalOcean and PubMatic, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DigitalOcean	1	6	6	0	2.38
PubMatic	0	4	6	0	2.60

DigitalOcean presently has a consensus price target of $43.27, indicating a potential upside of 51.09%. PubMatic has a consensus price target of $19.89, indicating a potential upside of 141.08%. Given PubMatic’s stronger consensus rating and higher probable upside, analysts clearly believe PubMatic is more favorable than DigitalOcean.

Summary

DigitalOcean beats PubMatic on 8 of the 13 factors compared between the two stocks.

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.

About PubMatic

PubMatic, Inc., a technology company, engages in the provision of a cloud infrastructure platform that enables real-time programmatic advertising transactions for digital content creators, advertisers, agencies, agency trading desks, and demand side platforms worldwide. Its PubMatic SSP, a sell-side platform, used for the purchase and sale of digital advertising inventory for publishers and buyers. The company also provides solutions, including OpenWrap, a header bidding solution; Openwrap OTT, a prebid-powered unified bidding solution; Openwrap SDK, an enterprise-grade management tools and analytics; Connect, a solution that provides additional data and insights to publishers and buyers; Activate, which allows buyers to execute direct deals on its platform across publisher inventory; Convert, a commerce media solution; and Identity Hub, an ID management tool for publishers that leverages specialized technology?infrastructure?to simplify the complex alternative identifier marketplace. Its platform supports an array of ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top (OTT), connected television, and media. The company was incorporated in 2006 and is based in Redwood City, California.