Head to Head Analysis: Alphabet (NASDAQ:GOOGL) vs. DigitalOcean (NYSE:DOCN)

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

Valuation and Earnings

This table compares Alphabet 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
Alphabet	$359.71 billion	5.58	$100.12 billion	$8.97	18.44
DigitalOcean	$806.59 million	3.50	$19.41 million	$1.11	27.92

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

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alphabet	0	10	26	4	2.85
DigitalOcean	1	6	6	0	2.38

Alphabet currently has a consensus target price of $199.75, suggesting a potential upside of 20.79%. DigitalOcean has a consensus target price of $39.83, suggesting a potential upside of 28.54%. Given DigitalOcean’s higher possible upside, analysts clearly believe DigitalOcean is more favorable than Alphabet.

Volatility & Risk

Alphabet has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500. Comparatively, DigitalOcean has a beta of 1.88, suggesting that its stock price is 88% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Alphabet	28.60%	32.49%	23.52%
DigitalOcean	10.86%	-43.11%	7.64%

Institutional & Insider Ownership

40.0% of Alphabet shares are held by institutional investors. Comparatively, 49.8% of DigitalOcean shares are held by institutional investors. 11.6% of Alphabet shares are held by company insiders. Comparatively, 1.0% of DigitalOcean shares are held by company 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.

Summary

Alphabet beats DigitalOcean on 11 of the 15 factors compared between the two stocks.

About Alphabet

Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube. It is also involved in the sale of apps and in-app purchases and digital content in the Google Play and YouTube; and devices, as well as in the provision of YouTube consumer subscription services. The Google Cloud segment offers infrastructure, cybersecurity, databases, analytics, AI, and other services; Google Workspace that include cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and other services for enterprise customers. The Other Bets segment sells healthcare-related and internet services. The company was incorporated in 1998 and is headquartered in Mountain View, California.

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.