RHD -- RH Donnelley Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : RHD -- RH Donnelley

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Duker who wrote (6)	2/23/1999 7:06:00 PM
From: Duker	of 36

RHD reads like a case study ... in the "What do you pay for this business?" genre ... FCF trailing was $56 mm for 1998 [$47.9 mm in Net Income + D&A ~ $20.8 - CapEx $12.7 mm ... assuming WC accounts wash]. Roughly $1.60 per share (using my incomplete estimates ... exact D&A and WC changes to follow with 10-Q) ... When it was spun-out of D&B, they saddled it with $500 mm in debt. Debt Stands at $486.6 mm. You really can not penalize the company for its capital structure (inherited from a greedy parent). If you "un-lever" the earnings, Net Income Unlevered would have been $72.8 mm after taxes ... on $391.1 mm in assets ... and the CapEx is roughly $8 mm less than D&A ... So, looking at Net Return on Assets, you get a figure of 18.6% ($72.8/391.1) or 20.66% when you add back D&A above CapEx ... Those are stellar ROA figures for a company that is growing (albeit, in the mid-single-digit range) and generating free cash to boot ... So what do you pay ... certainly more than 10 x's free cash flow (a 10% bond that doesn't take into account the present value of future growth opportunities?) ... how about 15 x's earnings ? That gets you to the mid-$20's ... and you are still using a significant discount to the market even though this earns Buffett type ROAs ... the company is not going away ... it has been around since 1888 (or so) ... 10 x's EBITDA? ... 10 x's for a growing free cash flow stream with great return characteristics? Sure: that gets you to $30.70 assuming that EBITDA grows at 5% and the free cash goes to pay down the debt ... It would seem to me that this stock should double over the next couple of years. I will add to my position tomorrow. By the way, they missed consensus by a cent! ... and I can only hope that Mr. Market gives them a haircut for that before I put in my order! --Duker

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next