Digimarc (DMRC) AI Stock Analysis

• Market Cap: $172.75M
• Dividend Yield: N/A
• Average Volume (3M): 162.50K
• Price to Earnings (P/E): ―
• Beta (1Y): 2.06
• Revenue Growth: -13.78%
• EPS Growth: 12.76%
• Country: US
• Employees: 215
• Sector: Technology
• Sector Strength: 88
• Industry: Information Technology Services
• EPS (TTM): -0.38
• Shares Outstanding: 21,756,987
• 10 Day Avg. Volume: 135,609
• 30 Day Avg. Volume: 162,501
• PEG Ratio: 1.07
• Price to Book (P/B): 12.98
• Price to Sales (P/S): 20.73
• P/FCF Ratio: -29.73
• Enterprise Value/Market Cap: 1.19
• Enterprise Value/Revenue: 6.09
• Enterprise Value/Gross Profit: 10.00
• Enterprise Value/Ebitda: -6.67
• 1Y Price Target: $15.00
• Price Target Upside: 88.92% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2
• EPS Forecast (FY): -1.32
• Revenue Forecast (FY): $32.86M

• Rating: 41 Neutral
• Price Target: $7.50 ▼(-5.54% Downside)

The overall stock score is primarily influenced by Digimarc's financial performance challenges, including consistent losses and negative cash flow. Technical analysis also indicates a bearish trend, further impacting the score. Valuation concerns, such as a negative P/E ratio, contribute to the low score. Despite some strategic progress noted in the earnings call, significant financial and operational improvements are needed.

Positive Factors

Operational Efficiency

The company's reorganization has significantly reduced operating expenses, enhancing operational efficiency and improving cash flow, which is crucial for long-term sustainability.

Strategic Growth in Digital Authentication

Strong positioning in digital authentication and AI advancements indicates potential for significant growth, enhancing competitive advantage and market relevance.

Gift Card Solution Adoption

Adoption by major brands like Target and Home Depot suggests strong market acceptance, potentially driving revenue growth and market penetration.

Negative Factors

Revenue Decline

A significant decline in revenue indicates challenges in maintaining sales momentum, which could impact long-term financial stability and growth prospects.

Annual Recurring Revenue (ARR) Decrease

A decrease in ARR suggests potential difficulties in retaining customers or contracts, which may affect future revenue predictability and cash flow.

Negative Cash Flow

Ongoing negative cash flow highlights liquidity issues, which could limit the company's ability to invest in growth opportunities and meet financial obligations.

Digimarc Business Overview & Revenue Model

Company Description

Digimarc Corporation (DMRC) is a technology company specializing in digital watermarking and data management solutions. The company operates primarily in the sectors of digital identification and product authentication, offering core products that enable businesses to improve their supply chain, enhance customer engagement, and streamline operations through its unique Digimarc Barcode technology. This technology allows for the embedding of digital information directly into products, packaging, and media, facilitating seamless interactions between consumers and brands.

How the Company Makes Money

Digimarc generates revenue primarily through licensing its technology and software solutions to various industries, including retail, consumer goods, and pharmaceuticals. The company offers subscription-based services that provide access to its digital identification platforms, which help clients improve traceability and product safety. Key revenue streams include direct sales of its software solutions, ongoing subscription fees for its services, and revenue from partnerships with large enterprises that integrate Digimarc's technology into their operations. Additionally, collaborations with major retailers and brands enhance its market presence and contribute to its earnings through increased adoption of its digital watermarking solutions.

Digimarc Financial Statement Overview

Summary

Digimarc faces significant financial challenges, with consistent losses impacting profitability and cash flow. Despite a low leverage, the company struggles with negative net income, declining revenue, and weak cash flow, necessitating improvements in revenue growth and operational efficiency.

Income Statement

Digimarc's income statement reveals significant challenges with profitability. The company has consistently reported negative net income, resulting in negative net profit margins. The TTM (Trailing-Twelve-Months) data shows a decline in revenue, with a negative revenue growth rate of -5.12%. Despite a relatively stable gross profit margin, the EBIT and EBITDA margins remain negative, indicating operational inefficiencies. The company needs to address its cost structure and revenue generation strategies to improve its financial health.

Balance Sheet

The balance sheet shows a low debt-to-equity ratio, suggesting a conservative approach to leveraging. However, the return on equity is negative, reflecting ongoing losses. The equity ratio is not explicitly calculated, but the company's equity position appears relatively stable compared to its assets. While the low leverage is a positive aspect, the inability to generate returns on equity remains a concern.

Cash Flow

Cash flow analysis indicates persistent negative operating cash flow, which is concerning for liquidity. The free cash flow growth rate is negative, and the operating cash flow to net income ratio is also negative, highlighting cash flow challenges. Although the free cash flow to net income ratio is slightly above 1, indicating some alignment between cash flow and reported earnings, the overall cash flow position is weak and requires improvement.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	33.66M	38.42M	34.85M	30.20M	26.52M	23.99M
Gross Profit	20.50M	24.24M	20.16M	15.32M	17.74M	16.06M
EBITDA	-30.75M	-33.16M	-39.15M	-51.05M	-30.32M	-30.04M
Net Income	-36.75M	-39.01M	-45.96M	-59.80M	-34.76M	-32.54M
Balance Sheet
Total Assets	55.44M	75.77M	80.55M	113.78M	64.88M	97.03M
Cash, Cash Equivalents and Short-Term Investments	12.56M	28.73M	27.18M	52.54M	33.33M	77.73M
Total Debt	4.55M	5.99M	5.99M	5.98M	1.03M	6.84M
Total Liabilities	14.05M	14.41M	18.63M	16.19M	9.50M	13.19M
Stockholders Equity	41.39M	61.36M	61.93M	97.59M	55.38M	83.84M
Cash Flow
Free Cash Flow	-17.73M	-26.78M	-22.73M	-45.88M	-27.69M	-21.57M
Operating Cash Flow	-17.00M	-26.57M	-22.00M	-44.41M	-26.12M	-19.94M
Investing Cash Flow	3.59M	-11.28M	12.56M	3.76M	25.98M	-34.26M
Financing Cash Flow	-3.03M	28.77M	-2.76M	60.50M	-5.77M	62.69M

Digimarc Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 7.94
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DMRC, the sentiment is Neutral. The current price of 7.94 is above the 20-day moving average (MA) of 7.85, below the 50-day MA of 8.83, and below the 200-day MA of 12.01, indicating a neutral trend. The MACD of -0.36 indicates Negative momentum. The RSI at 47.66 is Neutral, neither overbought nor oversold. The STOCH value of 75.21 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for DMRC.

Digimarc Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
WYY	59 Neutral	$68.05M	-29.18	-17.37%	―	9.62%	26.59%
CSPI	52 Neutral	$112.02M	―	-3.33%	1.08%	-0.37%	-161.02%
TLS	52 Neutral	$418.19M	―	-23.73%	―	17.44%	41.97%
CNDT	44 Neutral	$288.96M	―	-15.87%	―	-12.45%	-142.77%
DMRC	41 Neutral	$172.75M	―	-65.89%	―	-13.78%	12.76%
UIS	38 Underperform	$240.26M	-2.85	―	―	-4.93%	18.65%

Digimarc Corporate Events

Digimarc’s Financial Stability Threatened by Activist Shareholders and Litigation Challenges

Digimarc faces significant business risks due to the actions of activist shareholders and ongoing securities litigation. These activities can be costly and time-consuming, diverting management’s attention and resources away from core operations. The company may incur additional expenses by hiring legal, financial, and communications advisors, which could negatively impact financial results. Furthermore, uncertainties created by these shareholder initiatives may harm business opportunities, investor confidence, and stock price stability.

Digimarc’s Earnings Call: Strategic Progress Amid Challenges

During Digimarc’s recent earnings call, the sentiment was a mix of optimism and caution. The company highlighted strategic advancements in gift card solutions and product authentication, showcasing improved operational efficiency. However, challenges were noted due to a decline in Annual Recurring Revenue (ARR) and overall revenue, largely impacted by contract renegotiations. Despite these hurdles, Digimarc remains hopeful about future growth, particularly in digital authentication.

Digimarc’s Q3 2025: Revenue Decline Amid Strategic Expansion

Digimarc Corporation is a technology company specializing in digital watermarking and product authentication solutions, serving industries such as retail, pharmaceuticals, and tobacco. In its third quarter of 2025, Digimarc reported a decrease in total revenue to $7.6 million from $9.4 million in the same period last year, attributed mainly to the expiration of a significant commercial contract. Despite the revenue decline, the company made strides in expanding its product authentication solutions, including a pilot with a major pharmaceutical company and the launch of a new security label solution. Key financial metrics showed a reduction in operating expenses to $12.8 million, down from $17.3 million, and a narrowed net loss of $8.2 million compared to $10.8 million in the previous year. Non-GAAP measures indicated an improved gross profit margin of 81%, up from 79%. Looking ahead, Digimarc is poised to capitalize on its advancements in digital authentication and its growing market pipeline, setting the stage for potential growth in 2026 and beyond.

Digimarc’s Earnings Call: Innovation Amid Financial Challenges

The recent earnings call for Digimarc presented a mixed outlook, reflecting both promising advancements and concerning financial declines. On the positive side, the company celebrated significant product developments and strategic partnerships, such as the launch of a new gift card solution and recognition in Gartner’s Hype Cycle. However, these achievements were tempered by declines in Annual Recurring Revenue (ARR) and total revenue, alongside potential revenue losses from a major retailer contract renegotiation.