Understanding Datadog (NASDAQ: DDOG) Stock Metrics: Moving Averages, Volatility, and Valuation

Note: The figures in this article are sourced from a snapshot published in May 2020 and reflect market conditions at that time. They should not be used as current investment guidance.

Overview

Datadog, Inc. (NASDAQ: DDOG) is a cloud-native monitoring and analytics platform widely used in DevOps and SRE workflows. Beyond its technical capabilities, DDOG is also a publicly traded stock, and understanding its equity metrics can be useful for practitioners who follow the company as both a tool vendor and a market participant. This article breaks down key technical and fundamental stock indicators reported for DDOG as of early May 2020.

Simple Moving Averages (SMA)

A Simple Moving Average (SMA) smooths out price data over a defined period by calculating the arithmetic mean of closing prices. Different SMA windows are used by different types of market participants:

• SMA20 (20-day): Primarily used by short-term traders to identify near-term momentum and trend direction.
• SMA50 (50-day): More responsive to recent price changes than SMA200; commonly used by medium-term swing traders.
• SMA200 (200-day): The benchmark for long-term trend followers. A stock trading above its SMA200 is broadly considered to be in a bullish trend; below it signals a bearish trend. Many institutional investors watch for crossovers of this average as entry or exit signals.

At the time of reporting (circa May 2020), DDOG’s price distance from each moving average was as follows:

Positive distance across all three averages suggests the stock was trading above all major moving average benchmarks at that time, which is generally interpreted as a bullish technical signal.

Return Ratios: ROE, ROA, and ROI

Profitability ratios help investors assess how efficiently a company generates returns relative to its equity, assets, and invested capital. For DDOG at this snapshot:

• Return on Equity (ROE): -4.80%
• Return on Assets (ROA): -2.60%
• Return on Investment (ROI): -2.70%

Negative values across all three ratios are common for high-growth SaaS companies in early stages of public trading. Datadog, having IPO’d in September 2019, was still investing heavily in growth rather than profitability at this point. Investors in such companies typically look at revenue growth rate and gross margin trends rather than these ratios alone.

Volatility and Beta

Two common measures of stock price risk are Average True Range (ATR) and Beta:

• Average True Range (ATR): Reported at 2.02. ATR measures the average range of price movement over a given period and is used by traders to size positions and set stop-loss levels.
• Beta: Reported as 0.00 in the source data. This figure is almost certainly a data artifact — a newly public stock with limited trading history may show an undefined or zero Beta in some financial data systems. In practice, a Beta of 0 would imply zero correlation to broader market movements, which is implausible for an actively traded equity.
• Weekly volatility: 6.01%
• Monthly volatility: 32.46%

High monthly volatility of over 32% is consistent with a recently listed, high-growth technology stock in an uncertain macro environment (the early COVID-19 period).

Market Capitalization

Market capitalisation is calculated by multiplying the current share price by the total number of shares outstanding. It provides a quick reference for the market’s aggregate valuation of a company. DDOG’s market cap at the time of this report was approximately $13.74 billion.

This placed DDOG firmly in large-cap territory, notable for a company that had been public for less than a year. For DevOps practitioners, this market cap reflects the premium the market was willing to assign to Datadog’s cloud-native observability platform and its rapid enterprise adoption.

Valuation Multiples

Standard valuation ratios for DDOG at this snapshot:

• Price-to-Sales (P/S): 37.87 — reflects the market’s expectation of significant future revenue growth.
• Price-to-Earnings (P/E): 0.00 (not meaningful) — the company was not yet profitable, making P/E inapplicable.
• Price-to-Book (P/B): 31.83 — the stock was trading at a large premium to book value, again typical for SaaS growth companies.
• Price-to-Cash (P/Cash): 17.75
• Earnings Per Share (EPS): -$0.05 — a small per-share loss, consistent with the negative profitability ratios above.

Why EPS Growth Matters for High-Multiple Stocks

For growth-stage companies trading at elevated multiples like DDOG, the long-term investment thesis typically rests on EPS trajectory. Over time, a stock’s price tends to follow its earnings growth (assuming a relatively stable P/E multiple). The compounding nature of earnings growth means that acceleration in EPS — even modest — can produce outsized share price appreciation. Investors in DDOG were, in effect, betting that current losses would give way to meaningful, compounding earnings growth as the company scaled its go-to-market and retained high-margin recurring revenue.

Key Takeaways

• As of May 2020, DDOG was trading above all major simple moving averages, a technically bullish signal.
• Profitability metrics (ROE, ROA, ROI) were negative, typical for a high-growth SaaS company shortly after IPO.
• Monthly volatility exceeded 32%, consistent with a newly public, high-growth technology stock in a turbulent market.
• Valuation multiples (P/S of ~38, P/B of ~32) reflected market confidence in Datadog’s growth runway rather than near-term earnings.
• All figures are historical snapshots from early May 2020 and carry no forward-looking validity.

This article is for informational purposes only and does not constitute financial or investment advice.