![]() While Dynatrace is less levered overall, Datadog’s strong liquid asset base more than compensates for the difference here. It has the best net debt position and the best leverage ratios. Overall, it appears to have the best balance sheet out of the three. Looking over at these companies’ balance sheets, we see that Datadog is relatively well-positioned. The robust margins of the observability business indicate that the company should have no problem becoming profitable. Datadog is evidently further along the path to profit than Splunk is. I am hesitant to read too far into this, but investors should be aware that Datadog still needs to cross the threshold into profitability and should be traded with that in mind.Īt its latest quarterly diluted EPS of -$0.27 and operating income of -$104M, breakeven should be no more than one or two quarters out. This is sensible as it is funneling resources into continuing to grow. In contrast to it being the market leader on growth, I would certainly consider it a laggard when it comes to generating profits and cash flows. With a market cap roughly double that of the others, Datadog is pulling in half the cash from operations that Splunk is while only being marginally ahead of Dynatrace.ĭatadog has a ways to go with profitability. Furthermore, Datadog has the worst levered FCF margin out of the 3 as well as inferior cash from operations when we consider its size. Datadog and Splunk are both unprofitable. Each of the companies has a similar gross margin of roughly 80%, but only Dynatrace is converting this into net income at present. The profitability picture presents a different angle. ![]() ![]() It’s safe to say that Datadog is currently the fastest growing observability company at present. While all of these companies are growing at a brisk pace, Datadog’s numbers are well ahead of the pack its 1-year forward growth rate is roughly double that of the other two and its 3-5 year CAGR is in another league entirely. This trend is well reflected in growth rates for companies in the space.Ĭomparing revenue growth rates across these three, we see that Datadog had the best revenue growth y/y and is also expected to have the best forward revenue growth across a 1-5 span. ![]() For large-scale web-based applications, monitoring technology is critical to ensuring reliability while also getting a view into how data is flowing in real time. The increasing complexity of software infrastructure and the continued utilization of cloud services architectures has created consistently increasing demand for advanced software monitoring solutions. This should present a clear picture of its fundamental positioning and valuation in order to determine whether the stock is still a good buy at current prices.ĭatadog is currently the largest pure software observability player by market cap. This article will focus on relative financials between Datadog and its two main competitors in the software observability space. Here we can see that Datadog has performed roughly in line with Dynatrace this year, and that Splunk has been a notable laggard amongst the three. While other firms do participate in this market, such as Cisco (NASDAQ: CSCO) and Amazon (NASDAQ: AMZN), these 3 companies are the ones that are focused primarily on this market and with software observability as their defining core competency. Datadog makes most sense to compare to other publicly traded companies focused primarily on software monitoring/observability this includes Splunk (NASDAQ: SPLK ) and Dynatrace (NYSE: DT ). Of course, we must also consider how it has performed relative to its peers and not just the index at large. While not outperforming to the extent that it did throughout 2022, the stock’s price return has nonetheless maintained a premium above the index return throughout this time. Since its IPO in Q3 2019, it has generated a price return above the NASDAQ Composite. This is an extension of a history of outperformance from Datadog stock. After its latest earnings report, one in which it beat across both GAAP and non-GAAP metrics, DDOG stock has now climbed above the NASDAQ Composite in terms of YTD price return. Kira-Yan/iStock via Getty Images Overviewĭatadog ( NASDAQ: DDOG) is a leading software observability provider that continues to see momentum in its share price.
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