Digi International (DGII): Evaluating Valuation After Launch of XBee 3 Global LTE Cat 4 Modem for IoT Expansion

Digi International (DGII) has just introduced its Digi XBee 3 Global LTE Cat 4 cellular modem, targeting the growing needs of high-bandwidth IoT applications. This release highlights features designed to help manufacturers simplify development.

See our latest analysis for Digi International.

The launch of the XBee 3 Global LTE Cat 4 modem marks another milestone in Digi International's recent track record, and it appears to have coincided with growing investor optimism. The share price has climbed more than 30% year-to-date, and its 1-year total shareholder return of 25.5% highlights that momentum is building, even in the face of some short-term volatility.

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With impressive gains already logged and a suite of new products in the pipeline, investors are left to wonder whether Digi International is trading at an attractive valuation or if the market is already accounting for its future growth potential.

Most Popular Narrative: 5% Undervalued

Compared to its last close price of $38.30, the most popular narrative sees Digi International trading below its fair value estimate. This suggests that shares may have more upside if narrative assumptions prove accurate and market confidence strengthens.

The accelerating transition of customers to Digi's subscription-based and recurring revenue solutions, including higher attach rates on IoT products such as cellular routers and infrastructure management devices, points to ongoing double-digit annual recurring revenue (ARR) growth and improved profit margins. This supports both revenue stability and long-term earnings. Increased adoption of cloud and hybrid infrastructure, especially as enterprises and data centers pursue AI and edge deployments, is creating greater demand for Digi's edge connectivity and remote management solutions. This supports higher sales volumes and more premium-priced contracts, with a positive impact on topline revenue and net margins.

Read the complete narrative.

Want to see what’s driving this bullish target? This narrative’s fair value depends on ambitious subscription growth, increasing cloud demand, and rising profit margins. Discover the forecasted numbers supporting Digi’s valuation above its current share price—the full story reveals the bold financial moves factored into this price target.

Result: Fair Value of $40.50 (UNDERVALUED)

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

However, flat revenue guidance for 2025 and regional demand volatility could pressure the bullish outlook if recurring revenue growth slows or hardware sales weaken.

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

Another View: Multiples Point to Higher Valuation Risk

While the consensus sees Digi International as undervalued, comparing its price-to-earnings ratio with benchmarks tells a different story. Digi trades at 33.3 times earnings, well above both the US Communications industry average of 30.6x and its peer average of 24.8x. Even the fair ratio, which the market could gravitate toward, stands at 27.7x. This suggests the current premium may limit upside and raises the risk that shares are already pricing in much of the growth optimism. Could this mean the market has moved ahead of itself?

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

Build Your Own Digi International Narrative

If you'd rather challenge the current analysis or follow your own insights, you can craft a completely personalized Digi International narrative in under three minutes: 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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