Dynatrace

Software - Application · Technology

Price

$44.41

-0.42 (-0.94%)

Market Cap

$12.94B

Winston Score

Winston is curious

Mixed quality — meaningful strengths and weaknesses.

Share count rising — dilution

+2.8% over 4y

The company has issued more shares over this period, which dilutes each existing shareholder’s stake.

Diluted shares outstanding: 290.9M (2022) → 298.9M (2026)

Dynatrace makes software that helps large companies monitor and manage their computer systems, apps, and cloud infrastructure. Its main product is an AI-powered observability platform that watches over software in real time, spots problems, and helps engineers fix them fast. Customers are mostly large enterprises in industries like banking, retail, and healthcare that run complex digital operations.

Dynatrace earns money primarily through annual software subscriptions, which creates recurring, predictable revenue. The company operates globally, with a strong presence in North America and Europe, and generates over $1.4 billion in annual revenue with an 81% gross margin that reflects the high profitability typical of software businesses. Its main competitive advantage is its automated, AI-driven approach to monitoring, which reduces the manual work competitors require — but it faces real competition from large tech players like Datadog, New Relic, and even cloud giants like Microsoft and Google expanding into the same space.

Winston Score History

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Growth Profile

For growth stock investors

When traditional metrics don't capture the full picture, these are the signals growth stock investors use instead.

Revenue Growth

+19.4% YoY

YoY Growth Rate

Steady revenue growth

EPS Growth

-53.8% YoY

YoY Growth Rate

Earnings declining

R&D Spend

$474M/ year

↑ Rising (+23% vs prior year)

23.5% of revenue

1.6x the sector average (15%)

Investing heavily in future products and technology

Insider Activity

0.6%ownership

→ Flat

Insiders holding steady — not selling despite ability to

Cash Position

Cash flow positive

$1.1B cash & investments

Quarterly Free Cash Flow

↑ Burn rate improving

Company generates more cash than it spends — no dilution risk from fundraising

Heavy R&D investment

Dynatrace is putting 23% of revenue into R&D and that number is rising. That's 1.6x the sector average. And they're generating enough cash to self-fund it.

The Winston Score above measures business quality today. Growth stocks often score lower because they invest in the future rather than maximising current profits. These metrics show what matters most for evaluating that future.

Score breakdown

Every number that matters to educated investors.

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Quality

Gross Margin

80.9%

Premium pricing power — 80.9% gross margin

Operating Margin

7.0%

Modest — 7.0% operating margin

ROCE

1.3%

Weak — 1.3% return on capital

ROIC between 0% and 5%. They earn a few cents back per dollar invested in the business.

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Growth

Sales YoY

+16.0%

Fast-growing sales (16.0% YoY)

EPS YoY

-69.1%

Earnings shrinking (-69.1% YoY)

Earnings per share down more than 10%. Either a bad year, or a real decline.

EPS Consistency

2/8 quarters

Earnings rarely grow — volatile business

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Cash Flow

Cash Conversion

214%

Turns 214% of profit into real cash

FCF Margin

20.9%

Converts sales into free cash efficiently (20.9%)

Free cash flow margin above 20%. Out of every $100 in sales, more than $20 is real cash they keep.

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Stability

Debt / Equity

0.06

Conservative — low debt load (0.06)

Interest Cover

100.00x

—

Comfortably covers interest (100.0x)

Interest coverage above 8. Profits cover interest many times over.

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Valuation

P/E Ratio (TTM)

87.1x

Expensive — P/E 87.1

P/E over 35. The market is pricing in heavy, sustained growth.

P/E vs Forward

+70.9

GROWING

Earnings expected to grow meaningfully — cheaper on forward P/E (87.1 → 16.2)

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Dividends

Not applicable for this business.

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