eResearch is pleased to publish an Update Equity Research Report on DATA Communications Management Corp. (TSX:DCM | OTC:DGPIF | STU:18DN).
We are maintaining a Buy rating and increasing the one-year price target to $3.75/share from $3.60/share.
You can download our 19-page Equity Research Report by clicking on the following link: eR-DCM-2021_11_24_UR-FINAL
COMPANY DESCRIPTION:
DCM is a Canadian-based communications and marketing solutions provider that offers comprehensive online and offline communications and marketing solutions to businesses. Its technology-enabled content and workflow management capabilities solve the complex branding, communications, logistics, and regulatory requirements of Canada’s leading enterprises. Its services include custom loyalty programs, data and content management, location-specific marketing, labels and asset tracking, multimedia campaign management, and workflow management.
Q3/2021 FINANCIAL HIGHLIGHTS:
- Q3/2021 Revenue In-line as COVID-19 Impact Continues. Revenue was $56.9M, up 3.1% from $55.2M in Q2/2021 but down 8.2% from our estimate of $62.0M. The Company reported that certain clients deferred expenditures on services, and supply chain issues caused some potential business to be delayed into Q4/2021 or 2022.
- Strong Cash Flow Pays Down Debt. Adjusted EBITDA was $9.4M and debt in the quarter was reduced by $2.8M. DCM also announced that it refinanced various debt and credit facilities, which should save the Company approximately $1.5M in interest expense in 2022.
- Continues to Execute on its “Digital-First” Strategy. Recent wins include a deployment of ASMBL to a Canadian retailer and DCMFlex™ to a U.S. multi-state cannabis operator.
- Low Valuation Multiple Compared to Peers. DCM is currently trading at 0.5x 2022 EV/Revenue compared with printer comps trading at 1.3x EV/Revenue and well below the Digital Asset Management (DAM) & Tech-Enabled Workflow providers in the range of 2.6x to 7.1x EV/Revenue.
FINANCIAL ANALYSIS & VALUATION:
- With the lower Revenue in Q3/2021, we decreased our 2021 Revenue estimate to $238.7M from $245.0M and adjusted our 2022 Revenue estimate to $246.1M from $252.4M.
- We are keeping the revenue multiple at 0.8x and the EBITDA multiple at 7.0x, but we shifted the model one quarter forward, which positively affected the valuation.
- We estimate an equal-weighted price target of $3.74 based on a Discount Cash Flow (DCF) valuation ($6.00/share), a Revenue Multiple valuation ($3.03/share), and an EBITDA Multiple valuation ($2.20/share).
We are maintaining a Buy rating and increasing the one-year price target to $3.75 from $3.60.
You can download our 19-page Equity Research Report by clicking on the following link: eR-DCM-2021_11_24_UR-FINAL
FIGURE 1: DCM 1-Year Stock Chart – Up Over 240% Y/Y
Other DCM Research Report:
- Initiation Report (August 16, 2021): Digital-First Strategy and Tactical Consolidation Drives EBITDA Growth at DCM
Notes: All numbers in CAD unless otherwise stated. The author of this report, and employees, consultants, and family of eResearch may own stock positions in companies mentioned in this article and may have been paid by a company mentioned in the article or research report. eResearch offers no representations or warranties that any of the information contained in this article is accurate or complete. Articles on eresearch.com are provided for general informational purposes only and do not constitute financial, investment, tax, legal, or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this information should consult with a financial advisor. The article may contain “forward-looking statements” within the meaning of applicable securities legislation. Forward-looking statements are based on the opinions and assumptions of the Company’s management as of the date made. They are inherently susceptible to uncertainty and other factors that could cause actual events/results to differ materially from these forward-looking statements. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business or any investment therein. Any projections given are principally intended for use as objectives and are not intended, and should not be taken, as assurances that the projected results will be obtained by the Company. The assumptions used may not prove to be accurate and a potential decline in the Company’s financial condition or results of operations may negatively impact the value of its securities. Please read eResearch’s full disclaimer.
