Will DigitalOcean (DOCN) Beat Estimates Again in Its Next Earnings Report?

If you are looking for a stock that has a solid history of beating earnings estimates and is well-positioned to continue the trend in its next quarterly report, you should consider DigitalOcean Holdings, Inc. (DOCN). This company, which operates in the Zacks Internet – Software industry, shows the potential for another earnings beat.

Looking at the last two reports, this company has had a strong streak of beating earnings estimates. The company has beaten estimates by 16.04%, on average, over the last two quarters.

It was expected that DigitalOcean would post earnings of $0.38 per share for the last quarter, but the company instead reported earnings of $0.43 per share, delivering a surprise of 13.16%. For the previous quarter, the consensus estimate was $0.37 per share, when the company actually produced earnings of $0.44 per share, delivering a surprise of 18.92%.

Price and EPS are surprising

In the case of DigitalOcean, estimates are higher, thanks in part to this earnings surprise history. And when you look at the stock’s positive Zacks Earnings ESP (Expected Surprise Prediction), it’s a great indicator of future earnings beats, especially when paired with its solid Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better deliver a positive surprise almost 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat consensus estimates could be as many as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a revision of the Zacks Consensus definition that is related to revision. The idea is that the analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

DigitalOcean currently has an Earnings ESP of +2.19%, suggesting that analysts have become bullish on its near-term earnings potential. When we combine this positive Earnings ESP with the stock’s Zacks Rank #1 (Strong Buy), we can see that another beat is likely just around the corner. The company’s next earnings report is expected to be released on August 8, 2024.

In the case of the Earnings ESP indicator, it is important to remember that a negative value reduces its predictive power; however, a negative Earnings ESP value does not mean that profits have not been achieved.

Many companies end up beating consensus EPS estimates, but that may not be the only basis for their stock growth. On the other hand, some stocks can maintain their position even if they end up missing consensus estimates.

For this reason, it is very important to check a company’s Earnings ESP before its quarterly release to increase your chances of success. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they are released.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.