Datadog & Topicus: The Updates
Hi Multis
Only two Potential Multibaggers haven’t seen their Quality Score and Valuation score updated yet, and I'll cover both in this article. The companies are Datadog (DDOG) and Topicus (TOI.TO) (TOITF).
Datadog
Datadog's results were already covered earlier, so let's start with the Quality Score right away.
Personal conviction: 8.5/10 (unchanged)
Profitability: 8.5/10 (up from 8/10)
Datadog has now been profitable on a GAAP net income basis in every quarter since Q3 2023, so an upgrade is well-deserved.
Sales efficiency: 6.5/10 (unchanged)
While revenue growth of the last quarter was a bit higher, the forward expectations were revised a bit downward. It evens out and that means the efficiency score doesn't change.
Innovation: 4/5 (up from 3.5)
AI starts to get traction and Datadog clearly explained why it only makes up 6% of revenue so far, and made a strong case that the benefits will come in a few years. That's why I'm raising the score from 3.5 to 4, as that was my main point of criticism.
Must-have?: 3.5/5 (unchanged)
Revenue growth: 5/5 (unchanged)
Durability of growth: 9/10 (unchanged)
Management quality: 9/10 (unchanged)
Insiders' ownership: 5/5 (unchanged)
Multibagger potential now: 4/5 (up from 3.5)
Datadog's stock dropped by 22% since my last update, so that means that, with unchanged prospects, the company has a bit more potential to become a multibagger. That's why I'm upgrading it to 4/5.TAM & SAM: 4/5 (unchanged)
Financial Strength: 8.5/10 (unchanged)
Risk (negative): 1.5/5 (unchanged)
Competition (negative): 1.5/5 (unchanged)
Dilution (negative): 4/5 (unchanged)
Scale advantages shared (-5/+5): 3.5 (unchanged)
Conclusion Quality Score
Datadog's Quality Score goes up slightly, from 70.5 to 71.5. That remains a good score but stock-based compensation remains a pain point.