In a July 29 research note, eResearch Corp.'s Director of Equity Research Chris Thompson, CFA, MBA, P.Eng. stated that the implementation of communications and marketing solutions company DATA Communications Management Corp.'s ("DCM") (DCM:TSX; DCMDF:OTC) 14-point corporate strategic plan is transforming the business allowing it to achieve its largest revenue growth in four years.
The report from eResearch mentioned that DCM has developed a five-year strategy that is focused on several key areas, including "digital transformation, revenue and EBITDA growth, debt reduction, client revenue expansion, customer growth, leadership development, and employee satisfaction."
The analyst advised that in Q1/22, the company increased revenues by 11.1% year-over-year to CA$69.3 million, which was its highest quarterly y-o-y growth since FY/18, and said that these revenues exceeded eResearch's estimates for revenues of CA$64.2 million. The firm added that during Q1/22, revenues rose by 13.8% sequentially as the firm was able to successfully carry momentum from Q4/21 into Q1/22.
eResearch's Chris Thompson noted that DCM is expected to release Q2/22 financial results on August 9, 2022, and stated that the research firm anticipates that DCM will continue to deliver strong y-o-y revenue growth. Thompson indicated that DCM digital solutions currently has a pipeline of more than CA$10 million in new sales opportunities and said that the company now has a new SVP of Digital in place to expedite and propel these opportunities forward.
The report listed that DCM's customers include 250 enterprise clients and more than 2,000 small- to mid-size enterprise (SME) clients that it serves via 16 locations throughout Canada and the U.S.
eResearch commented, "we believe the company has robust product and service offerings that will enable it to transition its clients from print to digital services and thus should benefit from top-line growth and robust EBITDA margin expansion."
DCM is a Canada-based B2B provider of comprehensive online and offline communications and marketing solutions. The company's content and workflow management products help clients solve complex branding, communications, and logistics issues and to manage regulatory compliance requirements. The firm's services include "custom loyalty programs, data and content management, location-specific marketing, labels and asset tracking, multimedia campaign management, and workflow management."
eResearch Corp. advised that it is maintaining its Buy rating on DATA Communications Mgt Corp. and has a one-year price target of CA$4.00/share.
The analyst advised that based upon the higher revenue achieved by the firm in Q1/22, eResearch Corp. is raising its FY/22 revenues estimates from CA$246.1 million to CA$251.2 million.
The research company firm explained that the CA$4.00 price target was calculated by taking an equal-weighted average of three valuation methods. These included a discounted cash flow method which projected a value of CA$6.93/share, a 0.8x revenue multiple method which produced a value of CA$3.28/share, and 7.0x EBITDA multiple method that established a valuation of CA$1.80/share. eResearch pointed out that DCM shares are still trading at multiples below its peers.
DATA Communications Management Corp. shares trade under the symbol "DCM" on the Toronto Stock Exchange and last closed for trading at CA$1.35 on Monday, August 15, 2022. The company has approximately 44.06 million shares outstanding and a market cap of about CA$55.52 million. The firm's shares also trade under the ticker "DCMDF" in the U.S. on the OTC market.
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Disclosures for eResearch, Data Communications Management Corp., July 29, 2022
Analyst Affirmation: I, Chris Thompson, hereby state that, at the time of issuance of this research report, I do not own common shares, share options, or share warrants of DATA Communications Management Corp. (TSX:DCM).
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