Viavi Solutions (VIAV) vs. Digi International (DGII) Critical Review

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

Profitability

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

Net Margins Return on Equity Return on Assets
Viavi Solutions 10.57% 8.99% 3.44%
Digi International 5.16% 3.24% 2.95%

Valuation & Earnings

This table compares Viavi Solutions and Digi International’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Viavi Solutions $811.40 million 2.46 $166.90 million $0.35 25.09
Digi International $181.63 million 1.42 $9.36 million $0.35 27.43

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

Institutional and Insider Ownership

92.4% of Viavi Solutions shares are owned by institutional investors. Comparatively, 77.4% of Digi International shares are owned by institutional investors. 0.6% of Viavi Solutions shares are owned by insiders. Comparatively, 6.8% of Digi International shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for Viavi Solutions and Digi International, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Viavi Solutions 0 2 5 0 2.71
Digi International 0 0 4 0 3.00

Viavi Solutions presently has a consensus target price of $12.50, suggesting a potential upside of 42.37%. Digi International has a consensus target price of $14.50, suggesting a potential upside of 51.04%. Given Digi International’s stronger consensus rating and higher probable upside, analysts clearly believe Digi International is more favorable than Viavi Solutions.

Volatility & Risk

Viavi Solutions has a beta of 1.9, suggesting that its share price is 90% more volatile than the S&P 500. Comparatively, Digi International has a beta of 1.44, suggesting that its share price is 44% more volatile than the S&P 500.

Summary

Viavi Solutions beats Digi International on 9 of the 13 factors compared between the two stocks.

Viavi Solutions Company Profile

Viavi Solutions Inc. (Viavi) is a provider of network test, monitoring and assurance solutions to communications service providers, enterprises and their ecosystems. The Company also offers thin film optical coatings, providing light management solutions to anti-counterfeiting, consumer and industrial, government and healthcare and other markets. The Company’s segments include Network Enablement (NE), Service Enablement (SE), and Optical Security and Performance Products (OSP). The NE segment provides testing solutions that access the network to perform build-out and maintenance tasks. The SE segment offers solutions, which are embedded systems that yield network, service and application performance data. The OSP segment provides optical security solutions. The OSP segment’s security offerings for the currency market include Optically Variable Pigment (OVP), Optically Variable Magnetic Pigment (OVMP) and banknote thread substrates.

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.

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