Intrinsic value of Digi International Inc. - DGII

Previous Close

$13.01

  Intrinsic Value

$2.91

stock screener

  Rating & Target

str. sell

-78%

Previous close

$13.01

 
Intrinsic value

$2.91

 
Up/down potential

-78%

 
Rating

str. sell

We calculate the intrinsic value of DGII stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  38.60
  35.24
  32.22
  29.49
  27.04
  24.84
  22.86
  21.07
  19.46
  18.02
  16.72
  15.54
  14.49
  13.54
  12.69
  11.92
  11.23
  10.60
  10.04
  9.54
  9.08
  8.68
  8.31
  7.98
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
Revenue, $m
  316
  427
  565
  732
  930
  1,161
  1,426
  1,726
  2,062
  2,434
  2,841
  3,282
  3,758
  4,266
  4,808
  5,381
  5,985
  6,619
  7,284
  7,979
  8,704
  9,459
  10,245
  11,062
  11,912
  12,795
  13,712
  14,666
  15,657
  16,688
Variable operating expenses, $m
  301
  406
  537
  695
  883
  1,102
  1,353
  1,638
  1,957
  2,309
  2,694
  3,113
  3,564
  4,047
  4,560
  5,104
  5,676
  6,278
  6,909
  7,568
  8,255
  8,972
  9,717
  10,492
  11,298
  12,136
  13,006
  13,910
  14,850
  15,828
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  301
  406
  537
  695
  883
  1,102
  1,353
  1,638
  1,957
  2,309
  2,694
  3,113
  3,564
  4,047
  4,560
  5,104
  5,676
  6,278
  6,909
  7,568
  8,255
  8,972
  9,717
  10,492
  11,298
  12,136
  13,006
  13,910
  14,850
  15,828
Operating income, $m
  15
  21
  28
  37
  47
  59
  73
  88
  105
  125
  146
  169
  194
  220
  248
  277
  308
  341
  375
  411
  448
  487
  528
  570
  614
  659
  706
  755
  806
  860
EBITDA, $m
  25
  34
  45
  59
  74
  93
  114
  138
  165
  195
  227
  263
  301
  342
  385
  431
  479
  530
  583
  639
  697
  757
  820
  886
  954
  1,024
  1,098
  1,174
  1,254
  1,336
Interest expense (income), $m
  0
  0
  1
  2
  3
  5
  7
  9
  12
  15
  18
  22
  26
  30
  35
  40
  45
  51
  57
  63
  70
  77
  84
  91
  99
  107
  115
  124
  133
  143
  153
Earnings before tax, $m
  15
  20
  26
  34
  42
  52
  63
  76
  91
  106
  125
  143
  163
  185
  208
  232
  257
  284
  312
  341
  372
  403
  436
  471
  506
  544
  582
  622
  664
  707
Tax expense, $m
  4
  5
  7
  9
  11
  14
  17
  21
  24
  29
  34
  39
  44
  50
  56
  63
  69
  77
  84
  92
  100
  109
  118
  127
  137
  147
  157
  168
  179
  191
Net income, $m
  11
  15
  19
  24
  31
  38
  46
  56
  66
  78
  91
  105
  119
  135
  152
  169
  188
  207
  228
  249
  271
  295
  319
  344
  370
  397
  425
  454
  485
  516

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  478
  647
  855
  1,107
  1,406
  1,756
  2,157
  2,611
  3,120
  3,682
  4,297
  4,965
  5,685
  6,454
  7,273
  8,140
  9,054
  10,014
  11,020
  12,071
  13,168
  14,310
  15,499
  16,736
  18,021
  19,357
  20,745
  22,187
  23,687
  25,246
Adjusted assets (=assets-cash), $m
  478
  647
  855
  1,107
  1,406
  1,756
  2,157
  2,611
  3,120
  3,682
  4,297
  4,965
  5,685
  6,454
  7,273
  8,140
  9,054
  10,014
  11,020
  12,071
  13,168
  14,310
  15,499
  16,736
  18,021
  19,357
  20,745
  22,187
  23,687
  25,246
Revenue / Adjusted assets
  0.661
  0.660
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
  0.661
Average production assets, $m
  132
  178
  236
  305
  388
  484
  595
  720
  860
  1,015
  1,184
  1,369
  1,567
  1,779
  2,005
  2,244
  2,496
  2,760
  3,037
  3,327
  3,629
  3,944
  4,272
  4,613
  4,967
  5,335
  5,718
  6,116
  6,529
  6,959
Working capital, $m
  88
  119
  158
  204
  259
  324
  398
  482
  575
  679
  793
  916
  1,048
  1,190
  1,341
  1,501
  1,670
  1,847
  2,032
  2,226
  2,428
  2,639
  2,858
  3,086
  3,323
  3,570
  3,826
  4,092
  4,368
  4,656
Total debt, $m
  16
  37
  62
  92
  129
  171
  219
  274
  336
  404
  478
  559
  646
  739
  838
  943
  1,054
  1,170
  1,292
  1,419
  1,552
  1,690
  1,834
  1,983
  2,139
  2,301
  2,468
  2,643
  2,824
  3,013
Total liabilities, $m
  58
  78
  103
  134
  170
  212
  261
  316
  377
  446
  520
  601
  688
  781
  880
  985
  1,096
  1,212
  1,333
  1,461
  1,593
  1,732
  1,875
  2,025
  2,181
  2,342
  2,510
  2,685
  2,866
  3,055
Total equity, $m
  420
  568
  751
  973
  1,236
  1,543
  1,896
  2,295
  2,742
  3,236
  3,777
  4,364
  4,997
  5,674
  6,393
  7,155
  7,958
  8,802
  9,686
  10,610
  11,574
  12,579
  13,624
  14,711
  15,840
  17,014
  18,235
  19,503
  20,821
  22,191
Total liabilities and equity, $m
  478
  646
  854
  1,107
  1,406
  1,755
  2,157
  2,611
  3,119
  3,682
  4,297
  4,965
  5,685
  6,455
  7,273
  8,140
  9,054
  10,014
  11,019
  12,071
  13,167
  14,311
  15,499
  16,736
  18,021
  19,356
  20,745
  22,188
  23,687
  25,246
Debt-to-equity ratio
  0.040
  0.060
  0.080
  0.090
  0.100
  0.110
  0.120
  0.120
  0.120
  0.120
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.130
  0.140
  0.140
  0.140
  0.140
  0.140
  0.140
Adjusted equity ratio
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879
  0.879

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11
  15
  19
  24
  31
  38
  46
  56
  66
  78
  91
  105
  119
  135
  152
  169
  188
  207
  228
  249
  271
  295
  319
  344
  370
  397
  425
  454
  485
  516
Depreciation, amort., depletion, $m
  10
  13
  17
  22
  27
  34
  42
  50
  60
  70
  81
  94
  107
  122
  137
  154
  171
  189
  208
  228
  249
  270
  293
  316
  340
  365
  392
  419
  447
  477
Funds from operations, $m
  21
  28
  36
  46
  58
  72
  88
  106
  126
  148
  172
  198
  227
  257
  289
  323
  359
  396
  436
  477
  520
  565
  611
  660
  710
  762
  817
  873
  932
  993
Change in working capital, $m
  25
  31
  38
  46
  55
  64
  74
  84
  94
  104
  114
  123
  133
  142
  151
  160
  169
  177
  185
  194
  202
  211
  219
  228
  237
  246
  256
  266
  277
  288
Cash from operations, $m
  -3
  -3
  -2
  0
  3
  8
  14
  22
  32
  44
  59
  75
  94
  115
  138
  163
  190
  219
  250
  283
  318
  354
  392
  432
  473
  516
  561
  607
  655
  705
Maintenance CAPEX, $m
  -7
  -9
  -12
  -16
  -21
  -27
  -33
  -41
  -49
  -59
  -70
  -81
  -94
  -107
  -122
  -137
  -154
  -171
  -189
  -208
  -228
  -249
  -270
  -293
  -316
  -340
  -365
  -392
  -419
  -447
New CAPEX, $m
  -37
  -46
  -57
  -69
  -83
  -96
  -111
  -125
  -140
  -155
  -170
  -184
  -198
  -212
  -226
  -239
  -252
  -265
  -277
  -290
  -302
  -315
  -328
  -341
  -354
  -368
  -383
  -398
  -413
  -430
Cash from investing activities, $m
  -44
  -55
  -69
  -85
  -104
  -123
  -144
  -166
  -189
  -214
  -240
  -265
  -292
  -319
  -348
  -376
  -406
  -436
  -466
  -498
  -530
  -564
  -598
  -634
  -670
  -708
  -748
  -790
  -832
  -877
Free cash flow, $m
  -47
  -59
  -72
  -86
  -101
  -115
  -130
  -144
  -157
  -169
  -181
  -190
  -198
  -205
  -210
  -213
  -215
  -216
  -216
  -215
  -212
  -210
  -206
  -202
  -197
  -193
  -187
  -182
  -177
  -172
Issuance/(repayment) of debt, $m
  16
  20
  25
  31
  36
  42
  49
  55
  62
  68
  74
  81
  87
  93
  99
  105
  111
  116
  122
  127
  133
  138
  144
  150
  156
  162
  168
  175
  181
  189
Issuance/(repurchase) of shares, $m
  106
  133
  164
  197
  232
  269
  306
  344
  381
  416
  450
  483
  513
  542
  568
  593
  615
  637
  656
  675
  693
  710
  727
  743
  760
  777
  795
  814
  834
  854
Cash from financing (excl. dividends), $m  
  122
  153
  189
  228
  268
  311
  355
  399
  443
  484
  524
  564
  600
  635
  667
  698
  726
  753
  778
  802
  826
  848
  871
  893
  916
  939
  963
  989
  1,015
  1,043
Total cash flow (excl. dividends), $m
  75
  95
  117
  142
  168
  196
  225
  255
  285
  315
  344
  373
  402
  430
  458
  484
  511
  536
  562
  587
  613
  638
  664
  691
  718
  746
  776
  806
  838
  871
Retained Cash Flow (-), $m
  -117
  -148
  -183
  -222
  -263
  -307
  -353
  -400
  -447
  -494
  -541
  -587
  -632
  -677
  -720
  -762
  -803
  -844
  -884
  -924
  -964
  -1,004
  -1,045
  -1,087
  -1,130
  -1,174
  -1,220
  -1,268
  -1,318
  -1,371
Prev. year cash balance distribution, $m
  27
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -15
  -53
  -66
  -80
  -95
  -111
  -128
  -145
  -162
  -179
  -197
  -214
  -230
  -246
  -262
  -278
  -293
  -307
  -322
  -337
  -351
  -366
  -381
  -396
  -412
  -428
  -444
  -462
  -480
  -499
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  -14
  -49
  -57
  -66
  -74
  -81
  -86
  -90
  -93
  -94
  -94
  -91
  -88
  -83
  -77
  -71
  -64
  -57
  -50
  -43
  -36
  -30
  -25
  -20
  -16
  -12
  -10
  -7
  -5
  -4
Current shareholders' claim on cash, %
  75.8
  58.7
  46.4
  37.4
  30.7
  25.6
  21.6
  18.5
  16.1
  14.1
  12.5
  11.2
  10.1
  9.2
  8.4
  7.8
  7.2
  6.7
  6.3
  5.9
  5.6
  5.3
  5.0
  4.8
  4.5
  4.4
  4.2
  4.0
  3.9
  3.7

Digi International Inc. is a provider of mission and business-critical machine-to-machine (M2M) and Internet-of-Things (IoT) connectivity products and services. The Company creates connected products and deploys and manages critical communications infrastructures in a range of environments. It offers four categories of hardware products: cellular routers and gateways, radio frequency (RF), embedded and network products. The Company's cellular product category includes its cellular routers and all gateways. The Company's RF product category includes its XBee modules, as well as other RF Solutions. Its embedded product category includes Digi Connect and Rabbit embedded systems on module and single board computers. Its network product category includes console and serial servers and universal serial bus (USB) connected products. The Company's service offerings include wireless design services, Digi Device Cloud (which includes Digi Remote Manager) and enterprise support services.

FINANCIAL RATIOS  of  Digi International Inc. (DGII)

Valuation Ratios
P/E Ratio 38.4
Price to Sales 1.9
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 172.8
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -10.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.3%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0.2
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 3.5%
Return On Total Capital 2.9%
Ret/ On T. Cap. - 3 Yr. Avg. 3.8%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. 3.8%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 47.8%
Gross Margin - 3 Yr. Avg. 48.2%
EBITDA Margin 8.2%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 4.9%
Oper. Margin - 3 Yr. Avg. 6.2%
Pre-Tax Margin 4.9%
Pre-Tax Margin - 3 Yr. Avg. 6.6%
Net Profit Margin 4.9%
Net Profit Margin - 3 Yr. Avg. 5.6%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 18.1%
Payout Ratio 0%

DGII stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DGII stock intrinsic value calculation we used $228 million for the last fiscal year's total revenue generated by Digi International Inc.. The default revenue input number comes from 0001 income statement of Digi International Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DGII stock valuation model: a) initial revenue growth rate of 38.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DGII is calculated based on our internal credit rating of Digi International Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Digi International Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DGII stock the variable cost ratio is equal to 95.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for DGII stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Digi International Inc..

Corporate tax rate of 27% is the nominal tax rate for Digi International Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DGII stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DGII are equal to 41.7%.

Life of production assets of 14.6 years is the average useful life of capital assets used in Digi International Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DGII is equal to 27.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $330.493 million for Digi International Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 27.675 million for Digi International Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Digi International Inc. at the current share price and the inputted number of shares is $0.4 billion.

RELATED COMPANIES Price Int.Val. Rating
T AT&T Inc. 32.79 141.37  str.buy
SLAB Silicon Labora 104.02 46.64  sell
QCOM QUALCOMM Incor 75.00 18.48  str.sell
LTRX Lantronix, Inc 3.47 0.30  str.sell
INTC Intel Corporat 50.27 96.89  str.buy

CONTACT US      

About X-FIN       Privacy policy       Terms of use      

Copyright © X-FIN.com 2005-2019. All rigths reserved.