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Digi International Inc. (DGII) Hit a 52 Week High, Can the Run Continue?
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Have you been paying attention to shares of Digi International (DGII - Free Report) ? Shares have been on the move with the stock up 9.4% over the past month. The stock hit a new 52-week high of $40.86 in the previous session. Digi International has gained 64.1% since the start of the year compared to the -33.9% move for the Zacks Computer and Technology sector and the -25.4% return for the Zacks Computer - Networking industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 4, 2022, Digi International reported EPS of $0.45 versus consensus estimate of $0.38 while it beat the consensus revenue estimate by 7.91%.
For the current fiscal year, Digi International is expected to post earnings of $1.88 per share on $383.09 million in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $1.86 per share on $422.91 million in revenues. This represents a year-over-year change of 16.77% and 10.39%, respectively.
Valuation Metrics
Digi International may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Digi International has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 21.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 18.4X. On a trailing cash flow basis, the stock currently trades at 44X versus its peer group's average of 16.9X. Additionally, the stock has a PEG ratio of 1.02. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Digi International currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Digi International passes the test. Thus, it seems as though Digi International shares could still be poised for more gains ahead.
How Does DGII Stack Up to the Competition?
Shares of DGII have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is NetScout Systems, Inc. (NTCT - Free Report) . NTCT has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of B.
Earnings were strong last quarter. NetScout Systems, Inc. beat our consensus estimate by 16.33%, and for the current fiscal year, NTCT is expected to post earnings of $2 per share on revenue of $909.29 million.
Shares of NetScout Systems, Inc. have gained 14% over the past month, and currently trade at a forward P/E of 18X and a P/CF of 13.95X.
The Computer - Networking industry is in the top 14% of all the industries we have in our universe, so it looks like there are some nice tailwinds for DGII and NTCT, even beyond their own solid fundamental situation.
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Digi International Inc. (DGII) Hit a 52 Week High, Can the Run Continue?
Have you been paying attention to shares of Digi International (DGII - Free Report) ? Shares have been on the move with the stock up 9.4% over the past month. The stock hit a new 52-week high of $40.86 in the previous session. Digi International has gained 64.1% since the start of the year compared to the -33.9% move for the Zacks Computer and Technology sector and the -25.4% return for the Zacks Computer - Networking industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 4, 2022, Digi International reported EPS of $0.45 versus consensus estimate of $0.38 while it beat the consensus revenue estimate by 7.91%.
For the current fiscal year, Digi International is expected to post earnings of $1.88 per share on $383.09 million in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $1.86 per share on $422.91 million in revenues. This represents a year-over-year change of 16.77% and 10.39%, respectively.
Valuation Metrics
Digi International may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Digi International has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 21.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 18.4X. On a trailing cash flow basis, the stock currently trades at 44X versus its peer group's average of 16.9X. Additionally, the stock has a PEG ratio of 1.02. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Digi International currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Digi International passes the test. Thus, it seems as though Digi International shares could still be poised for more gains ahead.
How Does DGII Stack Up to the Competition?
Shares of DGII have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is NetScout Systems, Inc. (NTCT - Free Report) . NTCT has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of B.
Earnings were strong last quarter. NetScout Systems, Inc. beat our consensus estimate by 16.33%, and for the current fiscal year, NTCT is expected to post earnings of $2 per share on revenue of $909.29 million.
Shares of NetScout Systems, Inc. have gained 14% over the past month, and currently trade at a forward P/E of 18X and a P/CF of 13.95X.
The Computer - Networking industry is in the top 14% of all the industries we have in our universe, so it looks like there are some nice tailwinds for DGII and NTCT, even beyond their own solid fundamental situation.