Q: Hi 5i Team - Could you expand on Data Communication Management's recent quarterly report which resulted in a price drop of about one third. Do you feel the reaction is overdone or is it justified. An update of fundamentals would be helpful too.
Thanks.
Thanks.
5i Research Answer:
A small fractional loss in EPS missed estimates of 7c per share profit expected; revenue of $108.7M missed estimates of $117.6M. EBITDA of $12.6M missed estimates of $14.8M. Certainly it was a weak quarter and analyst estimates (3 analysts) have been ratcheting down. Net debt has increased marginally this year, to $240M. About 12% EPS growth is expected this year, but consensus calls for EPS to double in 2025. The stock is very cheap at 9X earnings and if it can meet that target should do well. But with revenue declining 11% in the Q3 we need to see that reverse. Costs have also come down, at least. Its valuation is the most interesting aspect here. It is small, leveraged, and somewhat cyclical, so hard to fully endorse.