Where this stock can be in a year...DCM has a market cap of $25 million and has about $65 million of debt. It's expected to generate $22 million of EBITDA in 2018. Since the current management team has taken over, revenues and EBITDA have shown positive momentum. I think the company can grow EBITDA by 10% to 15% per year (probably get to $30 million in 2-3 years) as well as generate FCF of ~$12 million (50% FCF yield) per year.
Therefore, if you fast-forward 12 months (using those assumptions), DCM (in 12 months) should look very similar to SXP (today) on the basis of EBITDA, debt, share count, etc. DCM will likley generated EBITDA of $25 million (and pay down debt close to $55 million).
So why shouldn't it be worth the same?
If you look at the relative valuation, I'd say that SXP is trading at a premium today primarily because of its lower leverage (and dividend). But that's exactly where DCM could be next year.
So why can't this be a $3 stock next year? I think it will.
| | DCM | SXP |
| | | |
| EBITDA | $22 | $27 |
| Net Debt | $67 | $52 |
| S/O | 21 | 28 |
| Share Price | $1.35 | $3.30 |
| | | |
| EV/EBITDA | 4.3x | 5.3x |