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Long/short equity

Is Dolan Media (DM) A High Growth, High Margin Software Company In Disguise?

Dolan Media (NYSE:DM) has had an ugly couple of years. After spending $200+ million to buy NDEX, its foreclosure services business, government intervention brought foreclosures to a virtual halt causing the consolidated EBITDA to fall from $90 million in 2009 to just $30 million or so this year. Similarly, its legacy business information business, while still cash generative are shrinking and generally unappealing to most investors. However, underneath it all lies Discover Ready, Dolan's rapidly growing, cloud-based legal discovery business which is on track to do $100 million in revenue this year, up 20% year over year, while generating 25-30% EBITDA margins.

Earlier this year, Dolan began the process of divesting its troubled businesses which should allow management...

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