DigitalOcean Holdings Inc (DOCN)
Solvency ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | 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 | 0.91 | 0.97 | 0.96 | 1.00 | 1.01 | 1.04 | 0.98 | 0.74 | 0.81 | 0.90 | 0.92 | 0.75 | 0.70 |
| Debt-to-capital ratio | 1.16 | 1.17 | 1.21 | 1.24 | 1.27 | 1.32 | 1.22 | 1.16 | 0.97 | 0.98 | 0.97 | 0.77 | 0.72 |
| Debt-to-equity ratio | — | — | — | — | — | — | — | — | 30.91 | 54.36 | 31.03 | 3.43 | 2.53 |
| Financial leverage ratio | — | — | — | — | — | — | — | — | 38.17 | 60.11 | 33.66 | 4.58 | 3.63 |
The solvency ratios of DigitalOcean Holdings Inc provide insights into the company's ability to meet its long-term financial obligations.
1. Debt-to-assets ratio: This ratio measures the proportion of a company's assets financed by debt. DigitalOcean's debt-to-assets ratio has been gradually increasing from 0.70 as of December 31, 2021, to 0.91 as of December 31, 2024. A higher ratio indicates a greater reliance on debt to fund assets.
2. Debt-to-capital ratio: This ratio reflects the percentage of a company's capital structure that is financed by debt. DigitalOcean's debt-to-capital ratio has also shown an upward trend, starting at 0.72 on December 31, 2021, and reaching 1.16 on March 31, 2023, before slightly declining to 1.16 on December 31, 2024. A higher ratio suggests a higher level of financial leverage.
3. Debt-to-equity ratio: The debt-to-equity ratio indicates the proportion of a company's financing that comes from debt versus equity. DigitalOcean's debt-to-equity ratio started at 2.53 on December 31, 2021, spiked to 54.36 on September 30, 2022, and then data was not available after March 31, 2023. The significant increase in this ratio may indicate increased financial risk and a higher reliance on debt financing.
4. Financial leverage ratio: This ratio measures the extent to which a company uses debt in its capital structure. DigitalOcean's financial leverage ratio experienced a substantial increase from 3.63 on December 31, 2021, to 60.11 on September 30, 2022, before data was no longer available after December 31, 2022. A higher financial leverage ratio implies a higher level of financial risk and potential instability.
Overall, the trend of increasing solvency ratios, particularly the debt-to-assets and debt-to-equity ratios, raises concerns about DigitalOcean's increasing reliance on debt to support its operations and the potential risks associated with elevated levels of financial leverage. Investors and stakeholders should monitor these ratios closely to assess the company's solvency and financial health.
Coverage ratios
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | 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 | 10.54 | 8.63 | 10.16 | 8.60 | 1.92 | -0.61 | -4.02 | -5.42 | -1.75 | -2.48 | -5.64 | -7.64 | -3.86 |
DigitalOcean Holdings Inc's interest coverage ratio experienced considerable fluctuations over the period from December 31, 2021, to December 31, 2024. The interest coverage ratio, which measures the company's ability to cover interest expenses with its operating income, was negative in the initial quarters, indicating a potential inability to meet interest obligations from operating profits alone.
Specifically, the interest coverage ratio was -3.86 as of December 31, 2021, deteriorated to its lowest point of -7.64 on March 31, 2022, and remained negative up to September 30, 2023. This suggests that the company faced challenges in generating sufficient operating income to cover its interest expenses during this period.
However, starting from December 31, 2023, the interest coverage ratio turned positive and showed an improving trend, reaching 10.54 as of December 31, 2024. This shift indicates that DigitalOcean Holdings Inc's operating income was more than sufficient to cover its interest payments by the end of the observed period.
Overall, the improving trend in the interest coverage ratio from negative to strongly positive values suggests a positive development in the company's financial health and its ability to meet interest obligations comfortably in the latter quarters of the period.