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Dotdigital Group reports 33.1% Net Income growth and 18.7% Revenue growth

17 Oct 2017 • About Dotdigital Group ($DOTD) • By InTwits

Dotdigital Group reported FY2017 financial results today. Overall looking at the company's long term financial model we can say that:
  • Dotdigital Group is a fast growth stock: FY2017 revenue growth was 18.7%, 5 year revenue CAGR was 27.3% at FY2017 ROIC 29.3%
  • Dotdigital Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.5%. At the same time it's in pair with industry average of 2.1%.
  • CAPEX is quite volatile: 0.28 in 2017, 0.51 in 2016, 0.22 in 2015, 0.24 in 2014, 0.56 in 2013
  • The company has highly profitable business model: ROIC is at 29.3%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Dotdigital Group ($DOTD) key annual financial indicators

mln. £201320142015201620172017/2016
P&L
Revenue12.19716.21321.36626.92631.96618.7%
Gross Profit11.31014.68019.07423.53127.50716.9%
SG&A11.05913.85817.36719.43111.9%
EBITDA4.8004.7386.8338.19710.13523.6%
Net Income0.7423.4194.6565.3687.14633.1%
Balance Sheet
Cash6.0729.30611.93217.31320.42818.0%
Short Term Debt0.0000.0000.0000.0000.000
Long Term Debt0.0000.0000.0000.0000.000
Cash flow
Capex0.2920.6070.6670.5020.375-25.3%
Ratios
Revenue growth27.8%32.9%31.8%26.0%18.7%
EBITDA growth60.4%-1.3%44.2%20.0%23.6%
Gross Margin92.7%90.5%89.3%87.4%86.1%-1.3%
EBITDA Margin39.4%29.2%32.0%30.4%31.7%1.3%
Net Income Margin6.1%21.1%21.8%19.9%22.4%2.4%
SG&A, % of revenue68.2%64.9%64.5%60.8%-3.7%
CAPEX, % of revenue2.4%3.7%3.1%1.9%1.2%-0.7%
ROIC38.0%28.5%31.4%28.9%29.3%0.4%
ROE7.3%27.6%28.6%25.5%27.3%1.8%
Net Debt/EBITDA-1.3x-2.0x-1.7x-2.1x-2.0x0.1x

Revenue and profitability


Dotdigital Group's Revenue surged on 18.7% in FY2017. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.3 pp from 30.4% to 31.7% in FY2017.

Gross Margin decreased slightly on 1.3 pp from 87.4% to 86.1% in FY2017. SG&A as a % of Revenue decreased on 3.7 pp from 64.5% to 60.8% in FY2017.

Net Income marign increased on 2.4 pp from 19.9% to 22.4% in FY2017.

Capital expenditures (CAPEX) and working capital investments


Dotdigital Group's CAPEX/Revenue was 1.2% in FY2017. Dotdigital Group's CAPEX/Revenue decreased on 2.6 pp from 3.7% in FY2014 to 1.2% in FY2017. Average CAPEX/Revenue for the last three years was 2.1%.

Return on investment


The company operates at high and attractive ROIC (29.33%) and ROE (27.30%). ROIC showed almost no change in FY2017. ROE increased slightly on 1.8 pp from 25.5% to 27.3% in FY2017.

Leverage (Debt)


The company has no debt. Cash jumped on 18.0% in FY2017.

Valuation


Dotdigital Group's trades at EV/EBITDA 22.2x and P/E 34.4x.

Appendix 1: Peers in Software & Computer Services


Below you can find Dotdigital Group benchmarking vs. other companies in Software & Computer Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Pennant International Group ($PEN)29.1%-4.7%-44.4%74.0%
Sopheon ($SPE)5.3%-16.6%23.0%69.7%
Coms ($COMS)46.8%763.3%110.4%36.1%
Microgen ($MCGN)-7.7%-0.0%7.2%34.5%
IMImobile ($IMO)12.7%12.6%26.1%23.5%
 
Median (34 companies)5.5%4.4%3.1%10.5%23.5%
Dotdigital Group ($DOTD)32.9%31.8%26.0%18.7%


Top companies by Gross margin, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Lombard Risk Management ($LRM)98.8%99.2%98.6%99.3%
Netcall ($NET)89.7%91.0%90.9%91.2%91.7%
Wandisco ($WAND)80.3%80.7%93.2%88.1%
Idox ($IDOX)90.8%89.4%89.3%86.8%
Sanderson Group ($SND)87.6%84.9%84.5%84.1%
 
Median (24 companies)62.0%57.8%58.8%56.6%86.0%
Dotdigital Group ($DOTD)92.7%90.5%89.3%87.4%86.1%


Top companies by EBITDA margin, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Mail.Ru Group Ltd ($61HE)47.4%50.5%34.6%35.2%
Idox ($IDOX)26.1%26.0%28.6%27.3%
Proactis Holdings ($PHD)18.3%22.8%26.4%23.7%3.7%
Oxford Metrics ($OMG)6.0%14.7%28.4%23.1%
Escher Group Hldgs ($ESCH)16.2%9.8%17.6%22.7%
 
Median (27 companies)12.8%11.1%12.3%11.0%11.0%
Dotdigital Group ($DOTD)39.4%29.2%32.0%30.4%31.7%


Top companies by CAPEX/Revenue, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Mail.Ru Group Ltd ($61HE)5.8%3.0%3.6%5.2%
Csf Group ($CSFG)4.0%2.4%7.1%4.9%
International Bus Mach Corp ($IBM)3.7%4.0%4.4%4.5%
IMImobile ($IMO)3.3%3.9%2.0%3.3%2.8%
Unisys Corp ($USY)2.5%4.1%5.0%3.0%
 
Median (27 companies)1.5%1.9%1.0%1.2%0.7%
Dotdigital Group ($DOTD)2.4%3.7%3.1%1.9%1.2%


Top companies by ROIC, %

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Rm ($RM.)48.6%130.8%289.2%263.8%
Triad Group ($TRD)-3.8%24.5%61.5%74.4%
International Bus Mach Corp ($IBM)31.0%28.1%25.7%18.7%
Oxford Metrics ($OMG)-0.1%0.8%14.6%16.3%
Idox ($IDOX)12.6%12.5%14.8%15.8%
 
Median (34 companies)11.6%9.8%5.3%8.4%7.5%
Dotdigital Group ($DOTD)38.0%28.5%31.4%28.9%29.3%


Top companies by Net Debt / EBITDA

Top 5 FY2013 FY2014 FY2015 FY2016 FY2017
Zoo Digital Group ($ZOO)3.2x38.3x
Progility ($PGY)1.8x12.8x6.8x
International Bus Mach Corp ($IBM)1.2x1.4x1.7x2.2x
Idox ($IDOX)1.3x1.0x1.3x1.2x
Datatec ($DTC)-0.3x0.3x0.4x1.1x
 
Median (24 companies)-0.4x-0.3x-0.5x-0.8x-1.6x
Dotdigital Group ($DOTD)-1.3x-2.0x-1.7x-2.1x-2.0x