As the need for more data and storage continue to expand, so too does the space that's needed to house the technology required for the expansion. The companies that own and operate the data centers throughout the country could be the big winners in the next decade as the world moves towards cloud computing. In cloud computing the data is stored in the "cloud" and no longer on site, thus increasing the demand for the data centers.


IN PICTURES: 9 Simple Investing Ratios You Need To Know

Increasing Earnings
Digital Realty Trust (NYSE:DLR) is a real estate investment trust (REIT) that owns, manages and develops technology-related properties. The stock currently pays a dividend yield of 3.5% and is trading with 5% of the all-time high set in mid-June. DLR reported earnings per share of $2.93 in 2009 and they are expected to increase to $3.30 in 2010 and $3.86 in 2011 according to the First Call estimates. The stock is trading with a forward P/E ratio of 15.8 and a price-to-sales of 7.31. (For further reading, see The REIT Way.)

DuPont Fabros Technology (NYSE:DFT) also operates as a REIT and has a similar business model to DLR. Other than simply providing the facilities that house the electronic equipment, the DFT will provide the technical services needed to construct a specific layout for each client. The company reported earnings per share of 88 cents per share in 2009, and over the next two years the number is expected to jump to $1.37 and $1.68, according to the First Call estimates. The dividend yield is currently 1.9% and the forward P/E ratio is 22.4 with a price-to-sales of 7.1.

Recent IPO
CoreSite Realty Corporation (NYSE:COR) began trading in September and is a pure play on data centers. The company has three primary offerings: wholesale data centers, co-location and peering. Currently COR has over two million square feet of space with over 500 customers. Since going public the company has traded within a narrow range and after two weeks of gyrations is close to where it opened the first day. COR posted operating revenue of $66.6 million in the first six months of 2010 with funds from operations at $17.5 million. The CEO has declined to give specific targets going forward, making this REIT a bit risky at such an early stage. (For more, see How To Assess A Real Estate Investment Trust.)

The Secondary Technology Play
There is no doubt that more companies will outsource their storage and data needs in the future. The question is how much and how quickly and who will be the big winners. At this time I go with the two names that have been around for years: DFT and DLR. (For more, see Big REIT Dividends.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  2. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  3. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  4. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  5. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  6. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  7. Stock Analysis

    Analyzing Porter's Five Forces on Under Armour (UA)

    Learn about Under Armour and how it differentiates itself in the competitive athletic apparel industry in light of the Porter's Five Forces Model.
  8. Stock Analysis

    The Biggest Risks of Investing in Qualcomm Stock (QCOM, BRCM)

    Understand the long-term fundamental risks related to investing in Qualcomm stock, and how financial ratios also play into the investment consideration.
  9. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  10. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
RELATED FAQS
  1. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  2. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  3. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  4. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  5. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
  6. What is the formula for calculating earnings per share (EPS)?

    Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center