What's DCM Worth?I'm going to chime in here. Take it for what it's worth.
Given the nature of DCM's business, best to value it off of EBITDA (or FCF).
The market's focus (and mine) is on debt repayment. Some capital return would be nice. Sustainable growth would be spectacular.
In my experience, businesses such as DCM will get valued at:
Scenario 1: 5x EV/EBITDA if growth is inconsistent and leverage is high
Scenario 2: 6x EV/EBITDA if growth is inconsistent, but leverage is moderated and capital returns is in sight.
Scenario 3: 7x EV/EBITDA if growth is more consistent and no balance sheet concerns
My estimate for EBITDA is $35 million in 2021. $40 million in 2022.
Debt (including leases and pension + OPEB) will likely be below $90 million as at Q2.
At 5x, it's a $1.70 stock.
At 6x, it's a $2.40 stock.
At 7x, it's a $3.10 stock.
In the meantime, debt will be repaid at a rate of 30c to 40c per year, for a yeild of 25%.
In my view, it will take 2-3 quarters for DCM to show growth and 4-5 quarters to convince the market. I do think that by the end of 2022 ...this will be a $3 stock.
If the company is able to grow revenues (>5%) and expand margins (>15%) beyond my expectations, then this could be worth well above $4 stock.
Again. Management is aligned. They are also moving in the right direction.