Value
2.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 1.8 |
| P/S | 6.4 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 4.8 |
| PEG | 1.2 |
| Analyst target | 3.0 |
- ▸Forward P/E: 25.8x
- ▸PEG: 7.16
- ▸Expensive valuation
DGII · Why this verdict
Why Digi International (DGII) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.1/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward price-to-earnings multiple of 24.6 times and a price-to-earnings-to-growth ratio of 6.84, the stock screens as richly priced relative to its growth rate, with less than 1% headroom remaining to near-term resistance. Valuation breakdown | Forward P/E compresses below 18x as earnings growth accelerates over the next 12 months. | →Stable |
| CounterA wide-moat franchise with exceptional cash conversion can sustain premium multiples for extended periods; if the strong revenue growth trajectory is maintained, the current multiple may prove reasonable in hindsight. | ||
The company relies on a single manufacturer based in China and sources certain components from single-sourced suppliers, creating two high-severity concentration risks that could disrupt production if any key vendor relationship deteriorates. Bear case | Management discloses no new single-source dependencies and no supply disruptions for four consecutive quarters. | →Stable |
| CounterThe company has likely managed these supplier relationships for years, and existing inventory buffers or long-term contracts may insulate near-term production even under geopolitical stress. | ||
The company has beaten consensus EPS estimates in each of the last four quarters, with an average positive surprise of roughly 6%, suggesting disciplined guidance-setting that consistently leaves room for upside. Earnings | Quarterly EPS continues to exceed consensus estimates by at least 3% in the next two reporting periods. | →Stable |
| CounterA streak of modest beats can reflect conservatively calibrated estimates rather than genuine earnings acceleration; as revenue growth moderates, the cushion for positive surprises will narrow. | ||
Free cash flow runs at approximately three times reported net income, indicating the business collects cash well ahead of its accounting earnings—a structural quality indicator that supports durability of returns. Quality breakdown | Free cash flow to net income conversion remains above 150% over the next four quarters. | →Stable |
| CounterAn FCF-to-earnings ratio this high can reflect working-capital timing benefits or deferred capital spending; normalization toward 100% conversion would remove the quality premium currently embedded in the valuation. | ||
At a forward price-to-earnings multiple of 24.6 times and a price-to-earnings-to-growth ratio of 6.84, the stock screens as richly priced relative to its growth rate, with less than 1% headroom remaining to near-term resistance.
→StableValuation breakdown
- Expectation
- Forward P/E compresses below 18x as earnings growth accelerates over the next 12 months.
CounterA wide-moat franchise with exceptional cash conversion can sustain premium multiples for extended periods; if the strong revenue growth trajectory is maintained, the current multiple may prove reasonable in hindsight.
The company relies on a single manufacturer based in China and sources certain components from single-sourced suppliers, creating two high-severity concentration risks that could disrupt production if any key vendor relationship deteriorates.
→StableBear case
- Expectation
- Management discloses no new single-source dependencies and no supply disruptions for four consecutive quarters.
CounterThe company has likely managed these supplier relationships for years, and existing inventory buffers or long-term contracts may insulate near-term production even under geopolitical stress.
The company has beaten consensus EPS estimates in each of the last four quarters, with an average positive surprise of roughly 6%, suggesting disciplined guidance-setting that consistently leaves room for upside.
→StableEarnings
- Expectation
- Quarterly EPS continues to exceed consensus estimates by at least 3% in the next two reporting periods.
CounterA streak of modest beats can reflect conservatively calibrated estimates rather than genuine earnings acceleration; as revenue growth moderates, the cushion for positive surprises will narrow.
Free cash flow runs at approximately three times reported net income, indicating the business collects cash well ahead of its accounting earnings—a structural quality indicator that supports durability of returns.
→StableQuality breakdown
- Expectation
- Free cash flow to net income conversion remains above 150% over the next four quarters.
CounterAn FCF-to-earnings ratio this high can reflect working-capital timing benefits or deferred capital spending; normalization toward 100% conversion would remove the quality premium currently embedded in the valuation.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Digi International has delivered four consecutive quarterly earnings beats averaging roughly 6% upside and converts earnings into free cash flow at nearly three times net income, but the stock trades within less than 1% of its near-term resistance target with a forward price-to-earnings multiple of 24.6 times and a price-to-earnings-to-growth ratio of 6.84, leaving the risk/reward firmly unfavorable; two unresolved supply-chain concentration risks add downside that the current geometry does not compensate for.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.3 |
| ROA | 3.1 |
| Gross margin | 8.9 |
| Op margin | 5.2 |
| Net margin | 4.6 |
| Current ratio | 4.3 |
| FCF quality | 10.0 |
| Moat | 7.9 |
| Piotroski F | 8.9 |
- ▸Excellent cash conversion: 298% FCF/NI
- ▸Wide economic moat
- ▸Strong Piotroski F-Score: 8/9
Growth
5.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 8.8 |
| EPS growth | 2.7 |
- ▸Strong growth: 25% YoY
Momentum
7.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 5.2 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 5.0 |
| erm sentiment | 5.0 |
Insider
3.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.0 |
- ▸Notable insider selling — $8,320,557 (0.306% of mkt cap)
Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.4 |
| quality rank | 5.6 |
| growth rank | 7.0 |
Technical
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.2 |
| support resistance | 3.2 |
| 52w position | 8.9 |
Risk (lower is worse)
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.7 |
| days to cover | 5.1 |
| volatility | 3.6 |
| put call | 10.0 |
| implied vol | 2.9 |
| beta | 7.2 |
| debt equity | 9.1 |
- ▸High IV: 63%
- ▸Concentration risks: 2 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 5.7 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:7.8>=5.5
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:33d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.0=NEGATIVE
Warning (1)
- INSIDER:0.31%=MODERATE
Reward-to-Risk
-1.04
Upside
-12.9%
Downside
12.5%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 63, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $2.7B<$5B
Investment implication
The F-path SELL output reflects an overall score of 5.1 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Momentum at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-1.0=NEGATIVE) reinforce the read. Current asymmetry R:R is -1.04 — supplementary context, not the trigger for this path.
The strongest dimensions are Momentum at 7.8, Risk (lower is worse) at 6.4, and Catalyst at 6.4; the weakest are Value at 2.9, Insider at 3.3, and Peer rank at 4.2. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -1.04 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P2Superior Cash Conversion
Trip ifFree cash flow to net income conversion falls below 100% for 2 consecutive quarters.
- P3Supply Chain Concentration Risk
Trip ifSupplier concentration HIGH-severity risk count falls below 1 item per annual 10-K filing.
- P4Stretched Valuation Thin Upside
Trip ifForward P/E compresses below 18x for 2 consecutive quarters.