DigitalOcean Holdings Inc (DOCN)
Solvency ratios
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt-to-assets ratio | 1.00 | 1.01 | 1.04 | 0.98 | 0.74 | 0.81 | 0.90 | 0.92 | 0.75 | 0.70 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 1.24 | 1.27 | 1.32 | 1.22 | 1.16 | 0.97 | 0.98 | 0.97 | 0.77 | 0.72 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | — | — | — | — | — | 30.91 | 54.36 | 31.03 | 3.43 | 2.53 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | — | — | — | — | — | 38.17 | 60.11 | 33.66 | 4.58 | 3.63 | 1.07 | 1.07 | 1.06 |
The solvency ratios of DigitalOcean Holdings Inc indicate the company's ability to meet its financial obligations and the extent of its reliance on debt financing.
1. Debt-to-assets ratio:
The debt-to-assets ratio has fluctuated over the periods analyzed, ranging from 0.74 to 1.04. A higher ratio suggests that a larger proportion of the company's assets are funded by debt, indicating higher financial risk. The increasing trend from 0.74 to 1.04 by March 31, 2024, may indicate a growing reliance on debt to finance assets.
2. Debt-to-capital ratio:
Similarly, the debt-to-capital ratio has varied between 0.97 and 1.32. This ratio reflects the proportion of the company's capital structure that is financed by debt. An upward trend in this ratio, from 0.97 to 1.32, indicates a higher reliance on debt financing relative to equity, which can increase financial leverage and risk.
3. Debt-to-equity ratio:
The debt-to-equity ratio, which was not available for some periods, highlights the proportion of the company's financing that comes from debt compared to equity. The ratios provided suggest significant variations, with ratios as high as 54.36 and as low as 2.53, suggesting potential fluctuations in the company's capital structure and level of financial risk.
4. Financial leverage ratio:
The financial leverage ratio indicates the extent to which a company uses debt to finance its assets. DigitalOcean's financial leverage ratio has ranged from 1.06 to 60.11, showing significant fluctuations. A higher financial leverage ratio implies higher risk due to increased reliance on debt to support operations and investments.
In summary, the solvency ratios of DigitalOcean Holdings Inc demonstrate varying levels of reliance on debt financing, with potential implications for the company's financial risk and stability. Investors and stakeholders should monitor these ratios to assess the company's ability to manage its debt obligations and sustain its financial health over time.
Coverage ratios
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Interest coverage | 8.60 | 1.92 | -0.61 | -4.02 | -5.42 | -1.75 | -2.48 | -5.64 | -7.64 | -3.86 |
The interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. A higher interest coverage ratio indicates a company is more capable of meeting its interest obligations.
Looking at the interest coverage ratio trend for DigitalOcean Holdings Inc over the past ten quarters, we can see a fluctuating pattern. In the most recent quarter ended March 31, 2024, the interest coverage ratio improved significantly to 8.60 compared to the previous quarter. This could indicate that the company's earnings before interest and taxes (EBIT) have increased substantially or its interest expenses have declined.
Prior to the latest quarter, DigitalOcean's interest coverage ratio exhibited instability, with negative values in some quarters. Particularly in the third quarter of 2023 and the first quarter of 2022, the company had negative interest coverage ratios, indicating that its EBIT was insufficient to cover its interest expenses. This raises concerns about the company's ability to meet its interest payments with its current operating income.
It is crucial for investors and creditors to monitor this ratio closely as it provides insight into DigitalOcean's financial health and its ability to service its debt. Management should aim to sustain a consistent and healthy interest coverage ratio to ensure financial stability and avoid potential liquidity issues in the future.