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

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

Analyst Ratings

This is a summary of recent recommendations and price targets 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 63.45%. Given DigitalOcean’s stronger consensus rating and higher possible upside, analysts plainly believe DigitalOcean is more favorable than Tucows.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Tucows	$395.86 million	0.37	-$75.82 million	($6.37)	-2.05
DigitalOcean	$1.10 billion	9.24	$259.26 million	$0.31	278.39

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.

Insider & Institutional Ownership

73.6% of Tucows shares are held by institutional investors. Comparatively, 49.8% of DigitalOcean shares are held by institutional investors. 8.4% of Tucows shares are held by insiders. Comparatively, 1.0% of DigitalOcean 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.

Risk & Volatility

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

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%

Summary

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

About Tucows

Tucows Inc. (NASDAQ: TCX) is a technology company that provides internet services, domain name services and software solutions for communications providers. Its businesses have historically included domain registration and related services, consumer internet connectivity through Ting Internet, and telecommunications software offered under the Wavelo brand. Through its Domains business, Tucows provides domain registration, wholesale domain services, digital identity products and related tools for businesses, resellers and individual customers.

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.