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 our one-year price target of $4.00 per share.
You can download our 25-page Equity Research Report by clicking on the following link: eR-DCM-2022_07_29_UR-2022-Q1-AGM_FINAL2
Company Overview
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.
Company Update:
AGM Presentation Outlined 14-Point Corporate Strategy.
- Recently at DCM’s Annual General Meeting, Richard Kellam, President, CEO & Director, presented a corporate overview of the Company’s 5-Year plan for revenue growth, margin expansion, and debt repayment as it transforms from a Print-First to Digital-First focused company.
- Kellam referenced the Company’s business momentum that was reflected in the Q1/2022 financial results with its strongest year-over-year revenue growth since 2018.
- The five-year strategy focuses on key areas such as digital transformation, revenue and EBITDA growth, debt reduction, client revenue expansion, customer growth, leadership development, and employee satisfaction.
- Kellam outlined 14 key corporate strategies (events) that are transforming the company:
- EVENT 1 – Five Year Strategy
- EVENT 2 – Change Management Practices
- EVENT 3 – Associate Engagement
- EVENT 4: Leadership Development
- EVENT 5: Brand Strategy and Repositioning
- EVENT 6: Marketing Initiatives
- EVENT 7: Commercial Capabilities
- EVENT 8: Client Leadership
- EVENT 9: New Business Development
- EVENT 10: Digital Acceleration
- EVENT 11: ESG Initiatives
- EVENT 12: Operational Excellence
- EVENT 13: Procurement Excellence
- EVENT 14: Financial Excellence
- Strategy Drives Revenue Growth in Q1/2022:
- DCM reported its strongest Y/Y quarterly revenue growth since 2018, with revenue of $69.3 million in Q1/2022, up 11.1% Y/Y and 13.8% Q/Q. First quarter revenue was above our estimate of $64.2 million. The Company carried its fourth-quarter 2021 momentum into the first quarter of 2022.
- The Company reported a gross profit of $20.3 million in Q1/2022, up 8.1% Y/Y and 14.7% Q/Q.
- DCM recorded a net income of $3.7 million in Q1/2022, an increase of 111% Y/Y, compared to $1.8 million in the prior-year period.
- Q2/2022 Financials Expected on August 9 and We Expect Continued Strong Y/Y Revenue Growth.
- The Company has a pipeline of over $10 million in new business opportunities targetting digital solutions and a new SVP of Digital to help move the opportunities through the sales funnel.
- DCM Multiples Still Trading Below Peers.
- DCM is currently trading at 0.5x 2022 EV/Rev compared with Printer comps trading at 1.1x EV/Rev, and well below the Digital Asset Management & Tech-Enabled Workflow providers trading at 2.1x and 3.5x EV/Rev, respectively.
Financial Analysis & Valuation
- We are raising our 2022 Revenue estimate to $251.2 million from $246.1 million based on the higher revenue in Q1/2022. We are maintaining our revenue multiple at 0.8x and our EBITDA multiple at 7.0x.
- We estimate an equal-weighted price target of $4.00 based on a DCF valuation ($6.93/share), a Revenue Multiple valuation ($3.28/share), and an EBITDA Multiple valuation ($1.80/share).
We are maintaining a Buy rating and the one-year price target of $4.00.
You can download the full 25-page report by clicking here: eR-DCM-2022_07_29_UR-2022-Q1-AGM_FINAL2
Other DCM Research Reports:
- Update Report (April 29, 2022): DCM’s Quarterly (Q4/2021) Revenue Improves Y/Y as a Sign of COVID Impacts Easing
- 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
FIGURE 1: One-Year Stock Chart
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.
