Rajiv Bhatia
Value, growth at reasonable price

Ascent Capital: Rich Valuation To Peers And Recent M&A, While Competitive Threats Loom

Investment Thesis:

    Ascent Capital trades at rich multiples to its peers and recent acquisitions in the security space. Ascent is also overvalued by looking at its steady state free cash flow. While management and sell-side analysts believe that Ascent is better insulated from competition via its dealer-only business model, Ascent faces upward pressure on the multiple it pays for its dealer contracts from competitors. Additionally, its growth through its internal channels is weakening. Home security pure players such as Ascent face increased competition from Cable/Telecom. While past entries by cable/telecom into the security market have failed to gain significant market share, there is evidence that cable/telecoms are now gaining traction. Based on EV/RMR (Recurring Monthly Revenue) multiple of 50x, still ...
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