The Internet of Things technology has become imperative in today’s technological era as this network of physical objects facilitates the exchange and connection of data. Technology is increasingly empowering modernized services to connect and communicate things and evolving communication mechanisms.

With the evolution of society and, more specifically, business operations, IoT is creating significant opportunities to enhance the quality of life. Statista projects the Internet of Things market to reach a staggering $1.06 trillion by 2025 worldwide, where industrial IoT is projected to dominate the market, reaching around $275.70 billion in the same year.

Also, the rising adoption of 5G technology, the rise in the demand for automation, and the widespread use of smart devices and broad applications will create favorable tailwinds for the IoT industry, accelerating digital transformation and raising operational efficiency through interconnected intelligent devices and systems.

Digi International Inc. (DGII), a leading global provider of Internet of Things (IoT) connectivity products and services, stands to capitalize on the market’s trends. The company is poised for robust growth with its tech-first solutions, strategic initiatives, and continuous addition of innovative products and solutions.

In the past few months, Digi International has introduced various innovations to cater to its customers with diverse needs. Digi International launched Digi 360, an all-new subscription-based solution supporting ease of use. Also, the company released Digi X-ON™, which is a breakthrough edge-to-cloud IoT solution. It also introduced the VOYAGE™ solution to solve supply chain challenges.

On the financial front as well, the company delivered robust results during the fourth quarter of 2024. Its revenue from IoT Solutions reported strong growth, and its gross profit margin was 61.1%, indicating an increase of 400 basis points from the prior year.

DGII’s stock performance is in sync with its operations performance. The company’s shares surged 28.1% over the past six months to close its last trading session at $30.20. Also, over the past year, the stock soared by 29.8%, reflecting its continuous growth.

Let’s look at factors that could influence DGII’s performance in the upcoming months.

Positive Recent Developments

On January 9, 2025, SmartSense by Digi®, a leading global provider of Internet of Things (IoT) connectivity solutions, introduced SmartSense VOYAGE, a solution that offers real-time visibility, control, and tracking of moving assets throughout the entire supply chain. The new IoT offering empowers organizations with real-time tracking and condition monitoring of moving assets.

The new-age platform is capable of addressing critical needs for retail, pharmaceutical, healthcare, and food service industries by delivering continuous monitoring of both location and environmental conditions. The solution will strengthen DGII’s future prospects.

On January 7, 2025, DGII launched Digi X-ON™, a creative edge-to-cloud IoT solution that provides the components needed for IoT systems from one trusted and reliable supplier. The solution offers secure, reliable, and scalable edge-to-cloud IoT solutions to drive fast, measurable results and ROI for customers.

Robust Financials

DGII reported total revenue of $105.05 million during the fourth quarter that ended September 30, 2024. The company’s operating income of $14.90 million indicates growth of 10.5% from the prior year’s period. Its income before income taxes showed robust growth of 67.6% from the year-ago value to $12.05 million.

In addition, the company’s net income amounted to $11.86 million or $0.32 per share, reflecting increases of 86.4% and 88.2% from the prior year’s quarter, respectively. DGII’s adjusted EBITDA came in at $26.25 million, up 5.3% year-over-year.

Also, the company’s cash and cash equivalents and total assets stood at $27.51 million and $815.07 million as of September 30, 2024.

Solid Historical Growth

DGII’s revenue and EBITDA have grown at respective CAGRs of 11.2% and 28.2% over the past three years. The company’s EBIT has increased 39% over the same timeframe, while its net income and EPS have improved at CAGRs of 29.5% and 25.3%, respectively.

Also, the company’s total assets and levered free cash flow have grown at CAGRs of 9.6% and 18.7% over the past three years, respectively.

Favorable Analyst Estimates

Analysts expect DGII’s EPS for the first quarter (ended December 2024) to increase 3.3% year-over-year to $0.50, and revenue for the same quarter is expected to be $104.08 million. Furthermore, the company has surpassed the consensus EPS estimates in all of the trailing four quarters.

Additionally, Street expects the company’s revenue and EPS for the fiscal year (ending September 2026) to increase 5.2% and 1.1% year-over-year to $446.24 million and $1.99, respectively.

High Profitability

DGII’s trailing-12-month gross profit margin of 59.83% is 18.8% higher than the respective industry average of 50.36%. Its trailing-12-month EBIT margin of 11.34% is significantly higher than the industry average of 5.38%. Also, the stock’s trailing-12-month net income margin of 5.31% is 43.4% above the 3.70% industry average.

Furthermore, the stock’s trailing-12-month ROTC and ROTA of 4.06% and 2.76% favorably compares to the industry averages of 3.11% and 2%, respectively. Similarly, its trailing-12-month levered FCF margin of 23.03% is considerably higher than the industry average of 11.23%.

POWR Ratings Reflect Promise

DGII’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DGII has a B grade for Quality, in sync with its higher-than-industry profitability.

Also, the stock has a B grade for Growth, consistent with its robust financial performance and historical growth.

DGII is ranked #5 in the 46-stock B-rated Technology – Communication/Networking industry.

Beyond what I have stated above, we have also given DGII grades for Sentiment, Value, Momentum, and Stability. Get access to all the DGII ratings here.

Bottom Line

DGII reported better-than-expected financial results for the fourth quarter. Analysts appear bullish about the company’s growth prospects, driven by robust demand for its quality and diverse product offerings, new innovative offerings, and strong market position. Also, its growing revenue and gross profit margin depict solid financial health.

Given DGII’s solid financials, accelerating profitability, and promising growth outlook, this stock could be an ideal buy now.

How Does Digi International Inc. (DGII) Stack Up Against Its Peers?

While DGII has an overall POWR Rating of A, investors could also check out these other stocks within the B-rated Technology – Communication/Networking industry with A (Strong Buy) or B (Buy) ratings: Gilat Satellite Networks Ltd. (GILT), Ceragon Networks Ltd. (CRNT), and Frequency Electronics, Inc. (FEIM).

For exploring more A and B-rated technology stocks, click here.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

DGII shares were trading at $30.39 per share on Thursday afternoon, up $0.19 (+0.63%). Year-to-date, DGII has gained 0.53%, versus a 0.98% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

More Resources for the Stocks in this Article