$Digi International (DGII.US)$Revenue has grown rapidly over...

逍遥投资派 commented on a stock · Feb 24, 2023 00:40

$Digi International (DGII.US)$Revenue has been rapidly increasing over the past 5 years, with an average growth rate of 16.4%. In 2022, it increased by 25.8%. Due to the rapid growth of operating expenses, operating profit once declined significantly by 77% in 2018, but then surged, with an average growth rate of 48% in the past 3 years. In 2022, it surged 1.8 times. The net income fluctuated more due to increased interest burden and other net income. In 2022, other income reached 6 million. If this impact is excluded, the net income should be around 14 million, and the corresponding growth rate would decrease to 35%.

A negative observation over the past 5 years is the transformation of interest expenses from income to expenses. In 2022, it reached 0.02 billion, accounting for 63% of operating profit. The interest burden is extremely heavy, and a high leverage ratio may also be the source of recent growth.

In Q1 2023, revenue increased by 30%, operating profit doubled to 0.012 billion, and the net income increased to 5.78 million.

The balance sheet shows that in 2022, goodwill and other intangible assets increased by 0.3 billion. This is likely the result of a large-scale acquisition. Therefore, the recent high growth is highly likely to be the result of the acquisition, and its sustainability is questionable.

Currently, the PE ratio is 62, and the TTM PE ratio has dropped to 50. If the net income reaches 0.03 billion for the whole year, the PE ratio will decrease to 40. It is advisable to observe for several more quarters to confirm the sustainability of the growth before making a determination.

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