What's Cloud Computing? How Have The Top 8 Companies Done YTD?


What is Cloud Computing?

Cloud computing (CC) is the technique of processing, storing, and managing data on a network of remote computers hosted on the internet rather than on a personal computer or local server. It is used by individuals for storing photos or documents, watching movies or listening to music on platforms like Netflix or Spotify and for companies to store information. A pure-play cloud computing company concentrates all its efforts on a single line of business, and, as such, tech giants like Google, Microsoft, and Amazon are not pure-play given their diversified business focuses. 

 

What Is CC's Market Size & Projected Growth?

 According to a Markets and Markets report, the cloud computing market will expand at a 17% CAGR between 2022 and 2027, reaching $1,240.90 billion. That's an astronomical growth rate which should bode well for CC companies and, as such, will be tracked on a regular basis in the 8 Largest Pure-Play Cloud Computing Companies Index.

 

Which Are the Largest Pure-Play CC Companies?

Below is a list of the largest pure-play CC companies presented in descending order of their performances as of December 22nd (i.e. YTD), their market capitalizations, their unique business model descriptions and the extent of their price-to-earnings growth (PEG) ratios above (i.e. worse) or below (i.e. better) the sector mean.

  1. Arista Networks (ANET): UP 97.1% YTD
    • Market Capitalization: $73.2B
    • Business Model: develops, markets, and sells cloud networking solutions that consist of a set of network applications, as well as gigabit Ethernet switching and routing platforms. It also provides post contract customer support services.
    • PEG Ratio: 1.99 (6.9% better than sector mean)
  2. DataDog (DDOG): UP 69.9% YTD
    • Market Capitalization: $29.6B
    • Business Model: operates an observability and security platform for cloud applications.
    • PEG Ratio: 2.53 (17.9% worse than sector mean)
  3. Drop Box (DBX): UP 32.9% YTD
    • Market Capitalization: $10.4B
    • Business Model: provides a content collaboration platform that allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as upgrade to a paid subscription plan for premium features.
    • PEG Ratio: 1.04 (51.3% better than sector mean)
  4. Pure Storage (PSTG): UP 32.2% YTD
    • Market Capitalization: $11.4B
    • Business Model: provides data services, such as data reduction, data protection, and encryption, as well as storage protocols, including block, file, and object. 
    • PEG Ratio: 2.07 (3.1% better than sector mean)
  5. Digital Reality Trust (DLR): UP 31.4% YTD
    • Market Capitalization: $41.7B
    • Business Model: is a REIT that provides data center, colocation, and interconnection solutions to leading enterprises and service providers worldwide.
    • PEG Ratio: 2.25 (4.9% worse than sector mean)
  6. Equinix (EQIX): UP 20.7% YTD
    • Market Capitalization: $75.3B
    • Business Model: provides businesses with access to important locations, partners, and opportunities to quickly and effectively expand their digital services, enhance customer experiences, and increase their overall value.
    • PEG Ratio: 3.56 (66.4% worse than sector mean)
  7. Verisign (VRSN): UP 2.2% YTD
    • Market Capitalization: $20.9B
    • Business Model: provides domain name registry services and internet infrastructure that enables internet navigation of .com and .net domains that support global e-commerce and also provides back-end systems for .cc, .gov, .edu, and .name domain names, as well as operates distributed servers, networking, security, and data integrity services
    • PEG Ratio: 2.06 (3.7% better than sector mean)
  8. Box (BOX): DOWN 17.5% YTD
    • Market Capitalization: $3.7B
    • Business Model: provides a cloud content management platform that enables users to collaborate on content internally and with external parties, automate content-driven business processes, develop custom applications, and implement data protection, security, and compliance features to comply with legal and regulatory requirements, internal policies, and industry standards and regulations. It also offers web, mobile, and desktop applications for cloud content management on a platform for developing custom applications, as well as industry-specific capabilities.
    • PEG Ratio: 0.91 (57.4% better than sector mean)


Summary

The above 8 CC stocks have an average market capitalization of $34.5B, an average PEG ratio that's 4.2% better than the sector mean and are UP 29.0% YTD, on average.


Is the PEG Ratio A Good Valuation Metric?

Since growth is a key component of a stock's expected return, the inclusion of the growth rate gives the PEG (i.e. Price-to-Earnings Growth over the next 12 months) ratio an advantage over the most commonly used alternatives. It offers a simple way for investors to see how cheap a stock is relative to its growth rate and for comparing stocks to competitors . All things being equal, a lower PEG ratio is better and a PEG ratio of less than 1 is a good indicator that a stock will outperform over the next few years.

The above being said, however, the PEG ratio shouldn't be used as a one-off test to decide whether to buy a stock or not. Instead, it's a good idea to use the PEG ratio along with other tools such as the balance sheet, debt burden, and cash flow, or other valuation metrics that use the income statement. It's also important to understand things like a company's competitive advantage, its addressable market, and its long-term growth prospects.


More By This Author:

These 6 "Analysts" Predict Gold Reaching $3,500, On Average, In 2024
These 10 AI Stocks Have The Best PEG Ratio Values Going Into 2024
These 8 Micro/Small Cap AI Stocks Index Are Still In A Bubble

Disclosure: none

Visit  munKNEE.com and register to receive our free Market Intelligence Report newsletter (sample  more

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.