DGII
Digi International Inc.
$67.63
Platform & Compounding FCF
80%
Two-stage FCF DCF
Moderate
·
Conviction
Undervalued
Trading 26.1% below fair value
You pay
$67.63
Bear
$50.59
Fair
$91.55
Bull
$141.39
Bear
$50.59
-25.2%
11% stage 1 growth, 11% discount
Fair
$91.55
+35.4%
19% stage 1 growth, 11% discount
Bull
$141.39
+109.1%
24% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (19% base case)
Terminal Value % of EV
45%
Implied Market Multiple
28.9x
Market is pricing in (growth)
13.9%
vs 18.6% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $70.75 from 18 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $91.55 per share.
Warnings
Stock-based employee pay equals 38% of profits. This dilutes existing shareholders, so cash flow alone overstates what owners really earn.
Wall Street's average price target is $70.75 (from 18 analysts). Our estimate is 39% above the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions