RE:vicario on bnnI thought Jason did very good job at profiling his view (and a reasonable outlook) on DCM. He was bullish, but cautious -- as everybody here should be (especially if you are going to recommend to others to buy it).
While Q3 torpedoed the company's operating momentum (not by managements's own doing), I still believe the turnaround story is very much intact. I also believe the shares are very undervalued.
I believe this business is able of generate EBITDA margins in the high single-digits. While I expect revenues to continue to trend down (in the mid single-digits), I believe DCM could conservatively generate EBITDA anywhere between $15 million and $20 million. Valued at 4x or 5x EV/EBITDA (and assuming regular paydown of debt) puts the valuation of the shares at between $2.30/share and $5.40/share by the end of next year. Yes, the range is large, but I think this goes to show that the market is already pricing in the WORST.
In my view, this is a $20 million EBITDA business that should be valued at 5x EV/EBITDA. In my view, the product lines should face less secular headwinds than TransCon (which trades at 5.5x EV/EBITDA).
BUT -- like Jason said, we need to see what Q4 results will look like before judging Q3 as a one timer and DCM as a continued turnaround story.
In my view, in Q4, I think we get $6 million of EBITDA and $8 million of FCF (due to improved working capital management). While this wouldn't be a homerun of a quarter -- I would expect the stock to rally on relief. I'm buying here.