Financial Analysis: Digi International (DGII) & Harmonic (HLIT)

Digi International (NASDAQ: DGII) and Harmonic (NASDAQ:HLIT) are both small-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their risk, analyst recommendations, earnings, dividends, profitability, institutional ownership and valuation.

Profitability

This table compares Digi International and Harmonic’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Digi International 5.16% 3.24% 2.95%
Harmonic -22.02% -13.06% -6.02%

Risk & Volatility

Digi International has a beta of 1.45, indicating that its stock price is 45% more volatile than the S&P 500. Comparatively, Harmonic has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Digi International and Harmonic, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Digi International 0 1 3 0 2.75
Harmonic 0 2 2 0 2.50

Digi International currently has a consensus price target of $14.50, indicating a potential upside of 49.48%. Harmonic has a consensus price target of $5.33, indicating a potential upside of 38.53%. Given Digi International’s stronger consensus rating and higher possible upside, analysts plainly believe Digi International is more favorable than Harmonic.

Insider and Institutional Ownership

77.6% of Digi International shares are owned by institutional investors. Comparatively, 99.9% of Harmonic shares are owned by institutional investors. 6.9% of Digi International shares are owned by company insiders. Comparatively, 4.3% of Harmonic shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Digi International and Harmonic’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Digi International $181.63 million 1.42 $9.36 million $0.35 27.72
Harmonic $405.91 million 0.77 -$72.31 million ($1.01) -3.81

Digi International has higher revenue, but lower earnings than Harmonic. Harmonic is trading at a lower price-to-earnings ratio than Digi International, indicating that it is currently the more affordable of the two stocks.

Summary

Digi International beats Harmonic on 11 of the 13 factors compared between the two stocks.

Digi International Company Profile

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.

Harmonic Company Profile

Harmonic Inc. (Harmonic) designs, manufactures and sells video infrastructure products, and system solutions. The Company has two segments: Video and Cable Edge. Harmonic provides technical support and professional services to its customers around the world. The Video segment sells video processing and production, and playout solutions and services to broadcast and media companies, streaming media companies, cable operators, and satellite and telecommunications (telco), and pay television (TV) service providers. Its Cable Edge business sells cable edge solutions and related services to cable operators around the world. The Video segment offers a range of products and solutions, as well as software-based media processing platforms. The Company’s Narrowcast Services Gateway (NSG) products are integrated edge gateway products that integrate routing, multiplexing, scrambling and modulation into a single package for the delivery of narrowcast services to subscribers over cable networks.

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