Digi International (DGII): Assessing Valuation After Quarterly Results and Upbeat Growth Guidance

Digi International (DGII) just released its quarterly results, and investors have plenty to unpack. Revenue climbed to $114.34 million, while net income dropped to $9.98 million. The company also issued new guidance pointing to double-digit growth next year.

See our latest analysis for Digi International.

Digi International’s recent financial update sent shares higher, with a 4.74% one-day share price gain and 36.56% year-to-date share price return. Momentum has been building, fueled by double-digit sales growth guidance and resilient demand, even though there has been some near-term profit compression. Over the past year, investors saw a 21.46% total shareholder return, and those holding for five years have enjoyed gains of more than 120%.

If this kind of steady growth and renewed market optimism has you searching for more opportunities, consider branching out to discover fast growing stocks with high insider ownership.

With shares now trading around $40 and bullish forward guidance in hand, the key question becomes: is Digi International's future growth already reflected in the price, or could there be a real buying opportunity emerging?

Most Popular Narrative: 12.6% Undervalued

The widely followed narrative for Digi International places fair value at $45.80, notably higher than the last close of $40.02. This creates an opportunity for a deeper look at what is driving this valuation gap.

Bullish analysts are encouraged by the company's consistent progress toward its long-term goal of reaching $200 million in annual recurring revenue and improved adjusted EBITDA by fiscal 2028. Recent management meetings left analysts more confident in Digi International's near-term growth prospects, suggesting effective execution of strategic initiatives.

Read the complete narrative.

Want to know why analysts are backing such a strong price target? One key input involves bullish projections for subscription revenue and future profit margins. Discover what bold assumptions are fueling this valuation and how the narrative expects Digi to outperform its peers. Find the full story in the complete narrative.

Result: Fair Value of $45.80 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, customers are taking longer to make decisions, and any delays in integrating new acquisitions could slow Digi’s expected growth trajectory.

Find out about the key risks to this Digi International narrative.

Another View: Current Price Comes With Some Premium

Looking at Digi International's market value through the lens of price-to-earnings, shares are trading at 36.4x, noticeably higher than both the US Communications industry average of 29.1x and the peer average of 21x. The fair ratio is 27.1x, well below today's multiple, meaning the stock commands a clear premium. Does this exposure to a higher multiple leave room for disappointment, or is the market right to look ahead?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Digi International Narrative

If you see the story from a different angle or prefer digging into the numbers firsthand, it takes less than three minutes to craft your own view. Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Digi International.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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