Digi International Inc. (NASDAQ:DGII) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$62m, some 2.7% above estimates, and statutory earnings per share (EPS) coming in at US$0.01, 33% ahead of expectations. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we’ve gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following the latest results, Digi International’s eight analysts are now forecasting revenues of US$316.1m in 2020. This would be a sizeable 24% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to soar 113% to US$0.42. Yet prior to the latest earnings, analysts had been forecasting revenues of US$316.8m and earnings per share (EPS) of US$0.72 in 2020. Analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a large cut to EPS estimates.
The consensus price target held steady at US$21.81, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. The consensus price target just an average of individual analyst targets, so – considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Digi International, with the most bullish analyst valuing it at US$26.00 and the most bearish at US$20.00 per share. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Digi International’s past performance and to peers in the same market. It’s clear from the latest estimates that Digi International’s rate of growth is expected to accelerate meaningfully, with forecast 24% revenue growth noticeably faster than its historical growth of 5.4%p.a. over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 3.4% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Digi International to grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Digi International. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at US$21.81, with the latest estimates not enough to have an impact on analysts’ estimated valuations.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Digi International analysts – going out to 2021, and you can see them free on our platform here.
We also provide an overview of the Digi International Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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