Is Digital Brands Group a Buy Under $5?

: DBGI | Digital Brands Group, Inc. News, Ratings, and Charts

DBGI – The shares of apparel company Digital Brands (DBGI) have been soaring in price thanks to several positive developments at the company. However, given that DBGI reported a disappointing bottom line in its fiscal second quarter, let’s evaluate if it is wise to buy the stock at its current price level. Read on.

Direct-to-consumer apparel seller Digital Brands Group, Inc. (DBGI), which is based in Austin, Tex., made its stock market debut on July 22, 2021, going public via the traditional initial public offering method and adding $10 million to its cash supply. The company recently launched DSTLD on Amazon Prime, while also launching its affiliate program across all its brands. Over the past month, the stock has gained 22.1% in price to close yesterday’s trading session at $3.53.

However, the stock has declined by  22.3% in price over the past three months and is currently trading 59.9% below its 52-week high of $8.80, which it hit on July 8, 2021. 

DBGI raised $5 million and $1.50 million, respectively, through the issuance of senior secured convertible promissory notes to Oasis Capital, LLC and FirstFire Global Opportunities Fund, LLC. Furthermore, ongoing labor shortages and supply chain disruption make the company’s near-term prospects uncertain.

Here’s what could influence DBGI’s performance in the coming months:

Growth Initiatives

On August 31, 2021, DBGI completed its acquisition of Stateside for $10 million. Stateside is now a wholly-owned subsidiary of the company. Hil Davis, DBGI’s CEO, said, “Stateside is expected to be accretive to DBG’s revenue and earnings per share in both the third quarter and fiscal year of 2021. Additionally, we believe the Stateside brand will drive meaningful near and long-term shareholder value.”

Solid Management Guidance

On September 28, 2021, DBG announced its initial 2022 revenue guidance of $37.5 million to $42.5 million, representing a 350% increase from 2021 revenue expectations. In addition, the company forecasts positive EBITDA for 2022, as it leverages its shared services platform.

Top Line Growth Doesn’t Translate into Bottom Line Improvement

For the fiscal second quarter, ended June 30, 2021, DBGI’s net sales surged 51% year-over-year to $1 million. The company’s total assets increased 63.8% year-over-year to $34.01 million. However, its total operating expenses increased 591% year-over-year to $11.24 million. In comparison, its loss from operations came in at $10.84 million, representing a 472.3% year-over-year increase. Also, its net loss was  $10.70, up 371.8% year-over-year.

Poor Profitability

In terms of the trailing-12-month CAPEX/Sales, DBGI’s 0.33% is 85.4% lower than the 2.23% industry average. Likewise, its 0.59% trailing-12-month asset turnover ratio is 43.9% lower than the 1.06% industry average. And the stock’s trailing-12-month ROTC and ROTA are negative compared to the 7.70% and 6.26% respective industry averages.

Lofty Valuation

In terms of trailing-12-month EV/S, DBGI’s 16.60x is 993.6% higher than the 1.52x industry average. Its 8.66x trailing-12-month P/Sis 158.9% higher than the 3.34x industry average. Furthermore,  the stock’s 2.09x trailing-12-month P/S is 60.4% higher than the 1.30x industry average.

POWR Ratings Reflect Uncertainty

DBGI has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DBGI has a D grade for Stability, which is in sync with its 1.23  beta.

DBGI has a C grade for Value, which is in sync with its higher-than-industry valuation ratios. In addition, the stock has a C grade for Quality, which is in sync with its lower-than-industry profitability ratios.

DBGI is ranked #32 of 42 stocks in the Specialty Retailers industry. Click here to access DBGI’s ratings for Sentiment, Growth, and Momentum as well.

Bottom Line

DBGI reported disappointing earnings results in the second quarter. Also, the stock is prone to a short squeeze. Since the stock looks overvalued at the current price level, we think it could be wise to wait for a better entry point.

How Does Digital Brands (DBGI) Stack Up Against its Peers?

While DBGI has an overall POWR Rating of C, one might want to consider investing in the following Specialty Retailers stocks with an A (Strong Buy) rating: The Tile Shop Holdings, Inc. (TTSH), Canadian Tire Corporation, Limited (CDNAF), and The Cato Corporation (CATO).

Note that TTSH is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.


DBGI shares were trading at $3.61 per share on Wednesday morning, up $0.08 (+2.27%). Year-to-date, DBGI has gained 6.18%, versus a 24.59% rise in the benchmark S&P 500 index during the same period.


About the Author: Nimesh Jaiswal


Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
DBGIGet RatingGet RatingGet Rating
TTSHGet RatingGet RatingGet Rating
CDNAFGet RatingGet RatingGet Rating
CATOGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Updated 2024 Stock Market Outlook

The bull market continues to rage on with the S&P 500 (SPY) making new highs. That is the past...the question is what does the future hold? That is why 44 year investment veteran Steve Reitmeister provides this updated 2024 Stock Market Outlook to help you carve a path to outperformance the rest of the year. Read on below for the full story...

3 Energy Stocks Set to Soar Beyond Expectations

Given the geopolitical tensions, increasing global oil demand, and supply adjustments, the energy sector is poised for robust growth. Therefore, investors might consider investing in energy stocks TechnipFMC (FTI), Weatherford International (WFRD), and ChampionX (CHX), which are poised to exceed expectations. Keep reading…

Has Carnival (CCL) Stock Turned Into a Buy After Earnings Release?

Carnival Corporation (CCL) reported record revenue in its most recent quarter but still faces a negative bottom line. The collapse of Francis Scott Key Bridge brings more uncertainty to its financials. Given these events, what stance should one take with CCL stock? Read more to find out…

3 China Stocks Positioned for Long-Term Growth

Despite facing challenges, the Chinese economy has demonstrated resilience, as evidenced by recent robust industrial output and retail sales data. Given this outlook, it might be an opportune time to own three top-notch China stocks, JD.com, Inc. (JD), China Automotive Systems (CAAS), and Youdao, Inc. (DAO). Read on…

Investor Alert: “Buy the Rumor, Sell the News!”

Everyone knows that the Fed is going to cut rates at some point this year. That is the worst kept secret on the planet helping to explain how we keep making new highs for the for the S&P 500 (SPY). Unfortunately that creates an interesting predicament for stocks after rates are cut. Plus another hurdle in the 2024 Presidential election. Steve Reitmeister is here to share his insights on the market outlook along with a preview of his top 12 stocks to outperform. Read on for more...

Read More Stories

More Digital Brands Group, Inc. (DBGI) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All DBGI News