eResearch is pleased to publish an Update Equity Research Report on DATA Communications Management Corp. (TSX:DCM | OTC: DCMDF)
We are maintaining a Buy rating and increasing the one-year price target to $4.00 per share from $3.75 per share.
You can download our 21-page Equity Research Report by clicking on the following link: eR-DCM-2022_04_29_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.
2021 FINANCIAL HIGHLIGHTS:
- Q4/2021 Revenue Slightly Higher Year-over-Year as COVID Impacts Easing. Revenue of $60.9 million in Q4/2021 was below our estimate of $64.2 million, but slightly higher than Q4/2020. Even though some clients deferred expenditures and supply chain issues caused delays, it was the first time since the pandemic started that quarterly revenue improved year-over-year.
- Corporate Consolidation Helps Maintain Margins. Restructuring charges were $9.7 million in 2021 but could drive $14 million in annual savings. Even with declining revenue year-over-year, Gross Margin in 2021 was 29.5%, up from 28.1% in 2020. Margins continued to benefit from cost-saving initiatives including factory consolidation, operation efficiencies, and revenue mix.
- “Digital-First” Strategy to Drive Revenue Growth. The Company reported that it is currently targeting 50 clients and the sales pipeline was $10 million. Recent wins include a deployment of 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 1.0x EV/Revenue, and well below the Digital Asset Management & Tech-Enabled Workflow providers trading at 2.6x and 4.6x EV/Revenue, respectively.
FINANCIAL ANALYSIS & VALUATION:
- We are maintaining our 2022 Revenue estimate at $246.1 million, our revenue multiple at 0.8x, and our EBITDA multiple at 7.0x. We shifted the model one quarter forward, which positively affected the valuation.
- We estimate an equal-weighted price target of $4.00 based on a DCF valuation ($6.49/share), a Revenue Multiple valuation ($3.14/share), and an EBITDA Multiple valuation ($2.70/share).
We are maintaining a Buy rating and increasing the one-year price target to $4.00 from $3.75.
You can download our 21-page Equity Research Report by clicking on the following link: eR-DCM-2022_04_29_UR-FINAL
FIGURE 1: DCM 1-Year Stock Chart – Up Over 78% Y/Y
Other eResearch equity research reports on DCM:
- Update Report (November 24, 2021): DCM – Q3 Financials In-line as Consolidation Improves Cash Flow
- 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.
