Digi International (NASDAQ: DGII) and Lumentum Holdings (NASDAQ:LITE) are both computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, dividends, risk, profitability, institutional ownership and earnings.

Insider & Institutional Ownership

78.3% of Digi International shares are owned by institutional investors. Comparatively, 95.7% of Lumentum Holdings shares are owned by institutional investors. 6.9% of Digi International shares are owned by insiders. Comparatively, 0.8% of Lumentum Holdings shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Digi International and Lumentum Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Digi International 0 0 4 0 3.00
Lumentum Holdings 1 4 9 1 2.67

Digi International currently has a consensus price target of $15.33, suggesting a potential upside of 63.99%. Lumentum Holdings has a consensus price target of $64.36, suggesting a potential upside of 12.41%. Given Digi International’s stronger consensus rating and higher possible upside, equities analysts plainly believe Digi International is more favorable than Lumentum Holdings.

Risk and Volatility

Digi International has a beta of 1.45, suggesting that its stock price is 45% more volatile than the S&P 500. Comparatively, Lumentum Holdings has a beta of 1.03, suggesting that its stock price is 3% more volatile than the S&P 500.

Profitability

This table compares Digi International and Lumentum Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Digi International 4.74% 3.17% 2.86%
Lumentum Holdings -10.25% 18.12% 9.48%

Earnings and Valuation

This table compares Digi International and Lumentum Holdings’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Digi International $186.98 million 1.33 $16.27 million $0.33 28.33
Lumentum Holdings $1.00 billion 3.52 $120.60 million ($1.69) -33.88

Lumentum Holdings has higher revenue and earnings than Digi International. Lumentum Holdings 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

Lumentum Holdings beats Digi International on 9 of the 15 factors compared between the two stocks.

About Digi International

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.

About Lumentum Holdings

Lumentum Holdings Inc. is a provider of optical and photonic products for a range of end market applications, including data communications (Datacom) and telecommunications (Telecom) networking and commercial lasers (commercial lasers) for manufacturing, inspection and life-science applications. The Company operates in two segments: Optical Communications (OpComms) and Commercial Lasers (Lasers). The Company’s OpComms products include a range of components, modules and subsystems to support and maintain customers in its two primary markets: Telecom and Datacom. The Company’s Lasers products serve customers in markets and applications, such as manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining, such as drilling in printed circuit boards, wafer singulation and solar cell scribing. The Company’s customers include original equipment manufacturers (OEMs).

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