Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- Digi International (Nasdaq: DGII) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
- ACTIVE STOCK TRADERS: Check out TheStreet's special offer for Real Money, headlined by Jim Cramer, now!
- DGII has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.16, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DIGI INTERNATIONAL INC is rather high; currently it is at 57.30%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, DGII's net profit margin of 4.80% significantly trails the industry average.
- DGII, with its decline in revenue, underperformed when compared the industry average of 16.5%. Since the same quarter one year prior, revenues fell by 12.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- DIGI INTERNATIONAL INC's earnings per share declined by 35.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DIGI INTERNATIONAL INC increased its bottom line by earning $0.43 versus $0.36 in the prior year. For the next year, the market is expecting a contraction of 37.2% in earnings ($0.27 versus $0.43).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Communications Equipment industry. The net income has significantly decreased by 36.2% when compared to the same quarter one year ago, falling from $3.62 million to $2.31 million.
-- Written by a member of TheStreet Ratings Staff