Reviewing Digi International (NASDAQ:DGII) and NetScout Systems (NASDAQ:NTCT)

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

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for NetScout Systems and Digi International, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NetScout Systems	0	1	0	0	2.00
Digi International	0	2	1	0	2.33

NetScout Systems presently has a consensus price target of $25.00, suggesting a potential upside of 0.62%. Digi International has a consensus price target of $35.67, suggesting a potential downside of 0.69%. Given NetScout Systems’ higher probable upside, research analysts clearly believe NetScout Systems is more favorable than Digi International.

Risk & Volatility

NetScout Systems has a beta of 0.65, suggesting that its stock price is 35% less volatile than the S&P 500. Comparatively, Digi International has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
NetScout Systems	-44.60%	7.37%	5.16%
Digi International	10.07%	11.00%	8.02%

Insider & Institutional Ownership

91.6% of NetScout Systems shares are owned by institutional investors. Comparatively, 95.9% of Digi International shares are owned by institutional investors. 3.7% of NetScout Systems shares are owned by company insiders. Comparatively, 3.3% of Digi International shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares NetScout Systems and Digi International”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NetScout Systems	$822.68 million	2.15	-$366.92 million	($5.15)	-4.82
Digi International	$424.05 million	3.14	$22.50 million	$1.13	31.78

Digi International has lower revenue, but higher earnings than NetScout Systems. NetScout Systems 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 NetScout Systems on 11 of the 14 factors compared between the two stocks.

About NetScout Systems

NetScout Systems, Inc. provides service assurance and cybersecurity solutions for protect digital business services against disruptions in the United States, Europe, Asia, and internationally. The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks. It also provides nGeniusPULSE, an active testing tool that enables enterprises to identify infrastructure performance issues and determine application availability, reliability, and performance; and nGenius Business Analytics solution, which enables service providers to analyze their network traffic. In addition, the company offers ISNG, an advanced passive network probe; packet flow systems that deliver targeted network traffic access to various monitoring and security tools and systems; and a suite of test access points that enable non-disruptive access to network traffic. Further, it provides cybersecurity solutions to protect their networks against distributed denial of service attacks under the Arbor brand, such as Arbor Sightline, Arbor Threat Mitigation System, Arbor Insight, Arbor Edge Defense, and Arbor Cloud. Additionally, the company offers advanced threat detection solutions, such as Omnis Cyber Investigator. It serves enterprise customers in various industries, including financial services, technology, manufacturing, healthcare, utilities, education, transportation, and retail; mobile operators, wireline operators, cable operators, Internet service providers, and cloud providers; and governmental agencies through a direct sales force, and indirect reseller and distribution channels. The company was incorporated in 1984 and is headquartered in Westford, Massachusetts.

About Digi International

Digi International Inc. provides business and mission-critical Internet of Things (IoT) products, services, and solutions in the United States, Europe, the Middle East, Africa, and internationally. The company operates in two segments, IoT Products & Services, and IoT Solutions. It offers cellular routers for mission-critical wireless connectivity; cellular modules to embed cellular communications abilities into the products to deploy and manage intelligent and secure cellular connected products; console servers to provide secure and remote access to network equipment in data centers and at edge locations; and radio frequency products, including embedded wireless modules, off-the-shelf gateways, modems, and adapters under the Digi XBee brand. The company provides embedded system products under the Digi Connect, ConnectCore, and Rabbit brands; and infrastructure management products, comprising of serial servers, which offers serial port-to-Ethernet integration of devices into wired Ethernet networks; and universal serial bus solutions. In addition, it offers Digi Remote Manager and Lighthouse, a recurring revenue cloud-based service that provides a secure environment for customers to manage their connected device deployment and network devices; SmartSense by Digi for monitoring wirelessly the temperature of food and other perishable or sensitive goods, monitor facilities or pharmacies by tracking the completion of operating tasks by employees, as well as quality control and incident management for food service, healthcare, and transportation/logistics industries; and Ventus which provides MNaaS solutions. Further, the company provides professional services, such as site planning, implementation management, application development, and customer training; data plan subscriptions; and enhanced technical support services, as well as Digi Wireless Design Services. Digi International Inc. was incorporated in 1985 and is headquartered in Hopkins, Minnesota.