Digi International (DGII) AI Stock Analysis

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Digi International

(NASDAQ:DGII)

79Outperform

Digi International exhibits strong financial health and operational efficiency, supported by positive earnings call highlights. Technical analysis shows bullish momentum but caution due to overbought indicators. The valuation is a concern due to a high P/E ratio and lack of dividends.

Digi International (DGII) vs. S&P 500 (SPY)

Market Cap

$1.23B

Dividend YieldN/A

Average Volume (3M)204.96K

Price to Earnings (P/E)29.1

Beta (1Y)1.31

Revenue Growth-4.47%

EPS Growth195.28%

CountryUS

Employees805

SectorTechnology

Sector Strength77

IndustryCommunication Equipment

Share Statistics

EPS (TTM)0.51

Shares Outstanding37,066,696

10 Day Avg. Volume195,028

30 Day Avg. Volume204,959

Financial Highlights & Ratios

PEG Ratio<0.01

Price to Book (P/B)2.03

Price to Sales (P/S)0.00

P/FCF Ratio13.25

Enterprise Value/Market Cap1.05

Enterprise Value/Revenue0.76

Enterprise Value/Gross Profit5.34

Enterprise Value/Ebitda4.85

Forecast

1Y Price Target

$33.25

Price Target Upside1.09% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering4

Digi International Business Overview & Revenue Model

Company DescriptionDigi International Inc. provides business and mission-critical Internet of Things (IoT) products, services, and solutions in the United States and internationally. The company operates in two segments, IoT Products & Services and IoT Solutions. It offers cellular routers for mission-critical wireless connectivity; cellular modules to embed cellular communications abilities into the products to deploy and manage intelligent and secure cellular connected products; console servers to provide secure and remote access to network equipment in data centers and at edge locations; and radio frequency products, including embedded wireless modules, off-the-shelf gateways, modems, and adapters under the Digi XBee brand. The company provides embedded system products under the Digi Connect, ConnectCore, and Rabbit brands; and infrastructure management products, comprising of serial servers, which offers serial port-to-Ethernet integration of devices into wired Ethernet networks; and universal serial bus solutions. In addition, it offers Digi Remote Manager, a recurring revenue cloud-based service that provides a secure environment for customers to manage their connected device deployment; Digi Wireless Design Services; and SmartSense by Digi for monitoring wirelessly the temperature of food and other perishable or sensitive goods, monitor facilities or pharmacies by tracking the completion of operating tasks by employees, as well as quality control and incident management for food service, healthcare, and transportation/logistics industries. Further, the company provides professional services, such as site planning, implementation management, application development, and customer training; data plan subscriptions; and enhanced technical support services. Digi International Inc. was incorporated in 1985 and is headquartered in Hopkins, Minnesota.

How the Company Makes MoneyDigi International generates revenue through the sale of its IoT connectivity products and services. Key revenue streams include the sale of hardware products such as cellular routers, gateways, and embedded systems, which provide the infrastructure necessary for IoT networks. Additionally, the company earns from software and cloud services, which include network management and monitoring solutions that facilitate the integration and operation of IoT devices. Maintenance contracts, support services, and professional services also contribute to the company's revenue. Digi International's growth is supported by strategic partnerships and collaborations with technology providers and industry leaders to expand its market reach and enhance its product offerings.

Digi International Financial Statement Overview

Summary

Digi International demonstrates solid financial health with strong cash flow generation and conservative leverage. Profitability has improved, with a stable gross profit margin and increased net profit margin. However, inconsistent revenue growth remains a challenge. The balance sheet is robust with low debt, enhancing stability.

Income Statement

Positive

Digi International has shown a stable gross profit margin of approximately 57.6% in TTM, indicating efficient cost management. The net profit margin improved to 8.5% TTM, reflecting enhanced profitability from 5.3% in the previous year. However, revenue growth has been inconsistent, with a decline in the latest annual report compared to the previous year. The EBIT margin improved slightly to 11.7% TTM, while the EBITDA margin remained robust at 15.6% TTM, showcasing good operational efficiency.

Balance Sheet

Positive

The debt-to-equity ratio stands at 0.18 TTM, showcasing a conservative leverage policy. The return on equity is moderate at 6.0% TTM, suggesting reasonable shareholder returns, although there's room for improvement. The equity ratio is solid at 74.2%, indicating a strong equity base relative to total assets, which enhances financial stability.

Cash Flow

Positive

Digi International's free cash flow grew by 11.0% in TTM, indicating strong cash generation capabilities. The operating cash flow to net income ratio is high at 2.64, signifying robust cash earnings relative to net income. Similarly, the free cash flow to net income ratio is favorable at 2.59, highlighting strong free cash flow generation relative to earnings.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
421.82M	424.05M	444.85M	388.23M	308.63M	279.27M
	Gross Profit
242.84M	249.91M	252.20M	216.29M	166.66M	143.97M
	EBIT
49.31M	48.09M	50.09M	-11.20M	-8.36M	-7.75M
	EBITDA
74.38M	71.34M	84.11M	72.17M	38.77M	33.38M
	Net Income Common Stockholders
35.64M	22.50M	24.77M	19.38M	10.37M	8.41M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
23.80M	27.51M	31.69M	34.90M	152.43M	54.13M
	Total Assets
825.30M	815.08M	835.53M	853.89M	619.53M	528.68M
	Total Debt
187.47M	137.39M	220.91M	15.52M	66.80M	79.67M
	Net Debt
163.67M	109.88M	189.22M	-19.38M	-85.63M	25.54M
	Total Liabilities
275.67M	234.04M	295.04M	352.38M	147.01M	157.18M
	Stockholders Equity
549.63M	581.03M	540.49M	501.51M	472.52M	371.50M
Cash Flow		Free Cash Flow
91.63M	80.87M	32.41M	35.77M	55.47M	33.58M
	Operating Cash Flow
94.14M	83.09M	36.75M	37.74M	57.72M	34.48M
	Investing Cash Flow
-282.00K	3.00K	-4.34M	-349.53M	-21.36M	-137.00M
	Financing Cash Flow
-99.21M	-89.05M	-34.50M	192.78M	62.24M	63.60M

Digi International Technical Analysis

Technical Analysis Sentiment

Positive

Last Price32.89

Price Trends

50DMA

28.55

Positive

100DMA

29.95

Positive

200DMA

29.79

Positive

Market Momentum

MACD

1.62

Negative

RSI

67.72

Neutral

STOCH

76.74

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DGII, the sentiment is Positive. The current price of 32.89 is above the 20-day moving average (MA) of 30.19, above the 50-day MA of 28.55, and above the 200-day MA of 29.79, indicating a bullish trend. The MACD of 1.62 indicates Negative momentum. The RSI at 67.72 is Neutral, neither overbought nor oversold. The STOCH value of 76.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DGII.

Digi International Risk Analysis

Digi International disclosed 39 risk factors in its most recent earnings report. Digi International reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Digi International Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DGII	79 Outperform	$1.23B	29.10	7.30%	―	-4.47%	195.28%
HLIT	76 Outperform	$1.06B	20.81	12.45%	―	20.53%	-27.75%
NTGR	61 Neutral	$899.49M	38.44	4.78%	―	-6.97%	―
Sector *	60 Neutral	$11.59B	10.34	-7.15%	2.94%	7.49%	-10.88%
COMM	58 Neutral	$1.26B	―	17.08%	―	-19.10%	93.30%
VSAT	56 Neutral	$1.38B	―	-8.49%	―	19.02%	76.67%
AIOT	55 Neutral	$787.11M	―	-20.95%	―	67.20%	-165.24%

* Technology Sector Average

Performance Comparison

DGII

Digi International

32.89

6.54

24.82%

HLIT

Harmonic

9.34

-2.24

-19.34%

AIOT

Powerfleet

5.90

0.40

7.27%

NTGR

Netgear

30.68

18.19

145.64%

VSAT

ViaSat

10.53

-8.31

-44.11%

COMM

CommScope Holding

5.81

4.55

361.11%

Digi International Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q2-2025)

% Change Since: 17.17%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong growth in ARR, effective debt reduction, and positive responses to new business models. However, challenges in the APAC region and macroeconomic uncertainties, including tariff concerns, present potential risks.

Q2-2025 Updates

Positive Updates

ARR Growth

Annual Recurring Revenue (ARR) grew 12% year-over-year to a record $123 million in the quarter, now representing 29% of annualized quarterly revenues.

Debt Reduction and Cash Flow

Free cash flow generation of $26 million helped reduce net debt to $45 million after paying down $25 million of debt during the quarter. The company expects to be net cash positive by the end of the fiscal year.

Inventory Management

Significant improvement in inventory position, approaching historical norms, while maintaining modest capital expenditures.

Channel and Solution Strategy

Strong improvement in software and service attach rates, and channel partners are reacting positively to new business models.

Negative Updates

APAC Region Weakness

Revenue in the APAC region has been weaker, impacting overall performance.

Macro Volatility and Tariff Concerns

Acknowledgment of fluid macro environment and potential impacts of tariffs, requiring agility and adaptation.

Company Guidance

During the Digi International, Inc. Second Quarter Fiscal 2025 Earnings Conference Call, significant metrics were highlighted, showcasing the company's financial performance and strategic progress. Annual Recurring Revenue (ARR) grew by 12% year-over-year, reaching a record $123 million, accounting for 29% of the annualized quarterly revenues. The company generated $26 million in free cash flow, enabling a reduction in net debt to $45 million after paying down $25 million. Capital expenditures remained below 1% of total revenue, resulting in a current free cash flow yield of 9%. The company is on track to be net cash positive by the fiscal year's end, a quarter earlier than initially anticipated. Inventory levels improved significantly, nearing historical norms, while the company's adaptable business model and diversified supply chain support continued scalability and profitability amidst a fluid macroeconomic environment.

Digi International Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Digi International Board Restructures for IoT Focus

Positive

Dec 13, 2024

Digi International announced the retirement of Sally J. Smith from its Board of Directors, effective after the 2025 Annual Meeting of Stockholders, and the nomination of two new members, Valerie Heusinkveld and Allison West Hughes, to the Board. This strategic move aims to leverage their extensive expertise in technology, finance, and marketing to enhance Digi’s focus on IoT advancements and recurring revenue-based solutions, strengthening its industry position and stakeholder value.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.