Dex Media: 6 Reasons We See Attractive Risk/Reward For Near-Term And Next 18 Months
- We believe this stock may be one of the best risk/rewards in small-cap equities today, with multiple drivers/catalysts supporting a rise.
- Dex Media is a business generating fundamental momentum and high profit-margins, with EBITDA margins of 41% and Free cash flow margins of 19%. FCF per share is $21-plus today.
- DXM has a low valuation of 0.5X P/FCF, not consistent with the bank debt which trade at 52-week highs and we expect to reach par by YE13.
- Fundamental momentum is expected to continue throughout 2014, with digital comps getting progressively easier (zero growth in 2H13). Double-digit gains seen.
- If the stock were to follow the recovery in its bank debt, it would be $24 today vs $11 currently.