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Yellow Media (OTC:YLWDF) is a Montreal-based holding of leading digital advertising and marketing solutions companies. Yellow Media has the largest, most comprehensive database of businesses in Canada.

With offices coast to coast, Yellow Media employs over 2,800 people. As recently as 2011, Yellow Media was Canada's largest Internet company according to techcrunch.com.

You can buy this digital business today at an EV/EBITDA multiple of 5.7x. Download my worksheet here and let's do some math.

The Quick Pitch - Cheap and Getting Cheaper By The Year!

This digital business has an EBITDA run rate of $43M/Quarter. This is $172M/Year.

Yellow Media's net debt at the end of Q2 is $672M.

There are 28M common shares outstanding.

The price per common share is $11.20.

For the digital business alone:

EV/EBITDA = [(28*$11.20) + $672M]/$172M = 5.7x

It gets better. In 1 year's time you get the digital business for:

EV/EBITDA = [(28*$11.20) + $418M]/$192M = 3.8x

Still don't believe you should own it? Maybe you could use some context. Here are the top three reasons you should buy.

Reason No. 1 You Should Buy

On an absolute basis it is undervalued. If you employ a DCF Analysis and use a 10% WACC and assume that the business is not growing, you find that the EV/EBITDA should trade at 10.3x.

Reason No. 2 You Should Buy

Other digital growth businesses trade at a higher multiple.

  1. RLOC - Reach Local 28.2x
  2. OMC - Omnicom 8.88x
  3. IPG - Interpublic 8.88x
  4. GOOG - Google 14.83x

Reason No. 3 You Should Buy

Struggling print businesses trade at a higher multiple.

  1. LEE - Lee Enterprises 6.53x
  2. GCI - Gannett 6.48x
  3. WPO - Washington Post 6.20x
  4. NYT - The New York Times Company 6.66x

I encourage you to take a look at the Operational Key Performance Indicators below before you buy to get a feel for the highly recurring nature of this business. But, before you do, I didn't even mention that by buying Yellow Media at this valuation you get a business that is presently producing $290M/Year of EBITDA for free. How do you like them apples?

Source: Yellow Media - Canada's Largest Internet Company - Buy Hand Over Fist