A Closer Look at Rackspace's Competitive Advantage

Next up: Rackspace Hosting. Is the executive team of this cloud computing superstar doing all it can to earn you outsized returns?

Rackspace blew away Street estimates for fourth-quarter revenue during profit soared more than 50%. Net margins improved by 100 basis points last year and cash from operations rose 24% to $244 million.

And but this a growth story with legs. CEO Lanham Napier said in an interview following the report that the company is in the "nascent" stages of a cloud computing possibility that could unlock billions in revenue. As the guy who's twice suggested Rackspace to our Motley Fool Rule Breakers members, I think he's right.

Looking at this table, I think it's a close call between Rackspace and Amazon. Now isn't that saying something? Amazon has proven to be a special business and the source of more than a few spiffy pops for our Motley Fool Stock Advisor scorecard.

More importantly, Rackspace has been improving in many of these metrics. Returns on capital are up 280 basis points since 2008. Normalized profit growth has accelerated in each of the past three years. So say what you will about hosting being a commodity business. Rackspace excels at it, and investors have enjoyed the fruits of its success.