The stock price for DATA Communications Management (DATA Communications Management Corp Stock Quote, Chart, News TSX:DCM) has had a great run over the past year, but there's more where that came from, according to Clarus Securities analyst Noel Atkinson. In a May 11 client update, Atkinson maintained a “Buy” rating on DCM and a $2.50/share target price for a projected return of 93.8 per cent. Based in Brampton, Ont., DATA Communications Management is a printing and marketing services organization with a client base of over 2,500 in Canada and the United States, including 70 of Canada’s 100 largest corporations as well as three of the five largest government agencies. Atkinson’s analysis arrived after the company released its full first quarter financial results for the 2022 fiscal year. “There were some cost pressures for input materials in the quarter, but the Company has the ability to pass on these increased costs to customers and expects to do so over the coming quarters,” Atkinson said. “It was a very clean quarter with no restructuring expenses and no government COVID grants.” DCM’s financial quarter was headlined by $69.3 million in revenue, beating management's pre-announced figure of $69 million as well as significantly outpacing the Clarus Securities projection of $59.7 million and producing a year-over-year increase of 11.1 per cent. “Q1 is usually a seasonally strong quarter for DCM, and we understand that business activity continued to recover – particularly in industry verticals that were hardest-hit for in-person activity during COVID,” Atkinson said. DCM also produced $12 million worth of new contract wins in the quarter, with a mix between new clients and expanding work with existing clients across several industry verticals. “Some of those wins started work in Q1 but most of the value will be recognized over the next year along with recent client wins in multiple verticals including financial services, healthcare, retail, and manufacturing,” Atkinson said. Atkinson notes that the company continues to see momentum from its customer base, as he forecasts recovery in order volumes from the office/store segments hardest-hit during COVID like retail and financial services. Gross profit also came in ahead of expectations at $20.3 million compared to the Clarus estimate of $18.1 million, though the gross margin of 29.3 per cent was slightly below the Clarus estimate of a 30.3 per cent margin. Meanwhile, the adjusted EBITDA of $9.4 million and a margin of approximately 14 per cent was also a beat in relation to the Clarus expectation of $6.1 million. The quarter was also notable for the company in that it was the first in several years where it did not incur any additional restructuring expenses. “As demonstrated by this strong first quarter, I am very pleased with the accelerated momentum and high levels of client engagement the DCM team is delivering,” said Richard Kellam, President & Chief Executive Officer of DCM in the company’s May 10 press release. “We expect this positive momentum to continue through 2022.” The confirmation of the quarterly results prompted minimal changes to Atkinson’s financial projections, with his 2022 revenue target essentially remaining steady in moving from $256.3 million to $256.2 million for a potential year-over-year increase of 8.9 per cent. Looking ahead to 2023, Atkinson slightly raised his forecast from $267.2 million to $267.5 million, suggesting a year-over-year increase of 4.4 per cent. In terms of valuation, Atkinson forecasts the company’s Price/Sales multiple to be 0.3x in 2022, then dropping to 0.2x in 2023. Similarly minimal shifts also present themselves in Atkinson’s adjusted EBITDA projections, with 2022 moving from $30.5 million to $30.4 million for an implied margin of 11.9 per cent. For 2023, Atkinson maintains a $33.2 million adjusted EBITDA forecast for an implied margin of 12.4 per cent. From a valuation standpoint, Atkinson projects the company’s EV/adjusted EBITDA multiple to be 4.5x in 2022, then dropping to a projected 4.1x in 2023. In terms of returns, Atkinson lowered his diluted EPS forecast for 2022 from $0.24/share to $0.20/share, while his 2023 projection dropped from $0.29/share to $0.26/share. Meanwhile, he forecasts the company’s P/E ratio to be 6.3x in 2022, ahead of a drop to 5.1x in 2023. “DCM continues to trade at a substantial discount to the peer group, even though the underlying business is enjoying a strong post-COVID recovery and leverage is modest,” said Atkinson, who cites adjusted EBITDA as the focus for his target valuation. “If DCM can gain traction with clients for its new high-margin enterprise digital solutions, we would look to revisit our target multiple.” For investors, DATA Communications Management has proven to be a breakeven stock since the start of 2022, recovering from a slow start to the year that saw a drop to $1.18/share on January 24 by rising to a 2022 high of $1.39/share on March 24 before levelling out. Over the past 12 months, the stock is currently up about 43 per cent.