RE:EPS estimates and price targetsLike you, I'm very bullish on DCM. I continue to think the company's earnings power and free cash flow generation are being overlooked by the market. If the company used all of its cash to repay debt, I think it could be debt free by the end of 2018. I also expect the company's sales declines to moderate (and recover) in the next few quarters as investments are made in business lines that have expanding end markets. Generally speaking, I believe DCM could be a consistent $20 million to $25 million EBITDA generator through the next five years.
I've copied my 2016 estimates below. I am forecasting Adjusted EBITDA of $25.1 million and EPS of $0.99. FCF should be close to $18 million (or $1.50/share). The closure of the Edmonton facility should have been factored in (we should see incremental benefits in 2017).
I would value the shares using a 4.5.x EV/EBITDA (similar to trancontinental).
=( (4.5 x 25 million) - ($50 million debt) )/ 12 million shares = $5/share
I think $5 by end of year is reasonable. I think there's more upside after that, but management will have to demonstrate it can renew growth. Hold onto your shares.
| | Q1/16 | Q2/16 | Q3/16 | Q4/16 | 2016 |
| | | | | | |
| Revenue | 74.6 | 72.3 | 74.9 | 81.0 | 302.8 |
| Growth YoY % | -1.8% | -1.5% | 1.0% | 0.0% | -0.6% |
| | | | | | |
| Gross Margin % | 23.9% | 22.0% | 24.0% | 24.0% | 23.5% |
| | | | | | |
| EBITDA | 5.7 | 4.5 | 6.7 | 8.5 | 25.4 |
| Margin % | 7.6% | 6.3% | 9.0% | 10.4% | 8.4% |
| | | | | | |
| Adjusted EPS | $0.19 | $0.14 | $0.27 | $0.39 | $0.99 |