DigitalOcean Holdings Inc (DOCN)

Short-term

Turnover ratios

Based on the provided data for DigitalOcean Holdings Inc, we can analyze the activity ratios as follows:

1. Inventory Turnover:
The inventory turnover ratio measures how efficiently a company manages its inventory. In this case, DigitalOcean had an inventory turnover of 8.53 times for the quarter ending September 30, 2022, and 16.17 times for the quarter ending September 30, 2024. The increase in inventory turnover indicates that the company improved its inventory management efficiency over the period analyzed.

2. Receivables Turnover:
The receivables turnover ratio assesses how quickly a company collects cash from its customers. DigitalOcean had a receivables turnover ranging from 8.92 times to 11.39 times during the period from September 30, 2022, to June 30, 2023. A higher turnover generally indicates that the company is efficient in collecting its receivables.

3. Payables Turnover:
The payables turnover ratio shows how efficiently a company pays its suppliers. DigitalOcean had a payables turnover ranging from 5.77 times to 73.31 times from December 31, 2024, to December 31, 2023. A higher turnover suggests that the company is managing its payables effectively, but it is important to also consider the industry norms when interpreting this ratio.

4. Working Capital Turnover:
The working capital turnover ratio evaluates how efficiently a company generates revenue from its working capital. DigitalOcean's working capital turnover increased from 0.25 times on December 31, 2021, to 2.43 times on December 31, 2024. This indicates that the company became more efficient in utilizing its working capital to generate sales over the period analyzed.

Overall, by analyzing these activity ratios, we can observe improvements in inventory management, receivables collection, payables management, and working capital efficiency for DigitalOcean Holdings Inc during the period under review.

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Average number of days

DigitalOcean Holdings Inc's Days of Inventory on Hand (DOH) ratio fluctuated significantly over the period provided. In September 2022, the DOH was 42.77 days, indicating the company held inventory for approximately 43 days. This figure reduced to 22.57 days by September 2024, suggesting the company managed its inventory more efficiently. However, the DOH was not available for many periods, indicating potential data limitations or changes in reporting practices.

The Days of Sales Outstanding (DSO) ratio remained relatively stable over the period, ranging from 32.05 to 40.92 days. A lower DSO indicates the company collected receivables more quickly. The consistent DSO levels suggest DigitalOcean maintained a steady accounts receivable management process during this timeframe.

The Number of Days of Payables ratio highlights the number of days it takes for the company to pay its suppliers. The ratio decreased from 27.08 days in December 2021 to 4.98 days in December 2023, indicating DigitalOcean improved its payables management. However, the ratio spiked to 63.29 days by December 2024, suggesting a potential change in payment terms or other factors affecting payables.

Overall, efficiency in inventory management improved over the period, while receivables and payables management showed mixed results. Investors and stakeholders should monitor these ratios to assess DigitalOcean's operational efficiency and working capital management.

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Long-term

DigitalOcean Holdings Inc's fixed asset turnover has been steadily increasing from 1.72 in December 2021 to 1.80 in December 2024. This indicates that the company is generating more revenue from its fixed assets over time.

In contrast, the total asset turnover ratio has shown some fluctuations, starting at 0.20 in December 2021, reaching its peak at 0.50 in September 2024, and slightly declining to 0.48 by December 2024. Overall, the trend shows an improvement in utilizing total assets to generate sales.

The increasing trend in fixed asset turnover combined with the fluctuating but generally improving trend in total asset turnover suggests that DigitalOcean Holdings Inc is becoming more efficient in generating revenue from both its fixed assets and total assets over the years. This indicates effective management of assets and operations to drive sales growth.