RE:RE:RE:RE:RE:RE:Jason Donville Moves the Stock
How the hell do you figure they are borrowing money to pay dividends???? Have you not even looked at the company's statement of cash flows??? They have not received any funds from financing since 2010. Their debt has come down from 61.4m in 2010 to 26.7m in 2012.
The company generates anywhere from $30m to $75m in cash from operations and pays out a measly $5m/year in dividends.
Also, you should know that the company doesn't pay the full cost of the particpation survey. Generally, the first licensee will pay 75% of the cost of the survey, and Pulse only 25%. However, Pulse retains ownership of the data and is able to amotize the full cost of the survey.
Finally, Donville is not using your standard ROE calculation since ROE uses net income as the numerator. Net income is completely useless for this company due to its accounting treatment of data. He is most likely using CROIC which is essentially the same instead you use EBITDA rather than net income.
And 6.5 times cash flow would be extremely cheap to pay for a company.... most companies trade well over 10x fcf. Using a discount rate of 12%, a perpetuity rate of 3%, and a growth rate of 5% over the next 10 years on $30m/year FCF, the present value of those cash flows are around $6.50/share. This stock was insanely cheap at $2/share -- it is a little more reasonable at these prices but still has room to grow.