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Paradigm launches coverage of DCM with a “Buy” rating

Count Paradigm Capital analyst Daniel Rosenberg as a fan of Data Communications Management (Data Communications Management Stock Quote, Chart, News, Analysts, Financials TSX:DCM).

In a report to clients December 9, Rosenberg launched coverage of DCM with a “Buy” rating and price target of $4.50, implying a return of 130% at the time of publication.

The analyst broke down his investment thesis on the company.

“DATA Communications Management Corp. (DCM) is a leading print marketing and communications management company in Canada,” he wrote. “With a diverse blue-chip clientele, DCM integrates deeply into marketing and operations workflows, offering a full suite of services and tools from data asset management to commercial printing. The company has successfully pursued M&A in a largely fragmented industry that is facing ongoing consolidation. Shares retraced following recent earnings results and a postal strike that softened top-line expectations. However, we think the reaction is overblown as the true strength of the operating model will be seen next year with restructuring efforts complete and cross-selling taking hold. At current levels, investors should benefit from increasing cash generation with DCM well positioned to continue to grab market share as a leading provider of print marketing and communications management in Canada.”

Rosenberg thinks DCM will post Adjusted EBITDA of $63.9-million on revenue of $482.2-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $69.5-million on a topline of $494.2-million in fiscal 2025.

“We value DCM with a blend of EV/EBITDA multiple and DCF. We utilize a 5.5x multiple on our 2025 adjusted EBITDA estimate, resulting in a valuation of $4.63/share. For our DCF, we utilize a WACC of 11.25% and a terminal growth rate of 1.5%, resulting in a valuation of $4.25/share. Our blended valuation results in our $4.50 target price,” he added.

About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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