Thursday, December 20, 2012
R. R. Donnelley forecasted to be stock Deal Of The Year
Matthew Frankel of SeekingAlpha.com, a Website for stock market news and financial analysis, has picked North America’s largest printing company, R. R. Donnelley and Sons Co. (RRD), as a contender for 2013’s high-yielding Deal Of The Year.
Among the things he likes about the company are its strategies to lower its cost structure, improve the quality of its products to stand out in the industry, and grow by acquisition. (It has acquired nine companies since 2010.)
He predicts: “RRD is expanding by capitalizing on the exit from the market of smaller, weaker competitors. As RRD acquires smaller printing firms and expands, the company will gain market share as it leverages its geographic and product breadth in its favor. Operating margins in 2012 and 2013 will be helped by increased productivity and cost synergies from its recent acquisitions, and its revenues will rise slowly but surely.”
Especially impressed by RRD stock’s “insanely cheap” valuation (currently around $9.00 per share), Mr. Frankel writes:
"RRD has paid out $1.04 a share annually every year since 2004. Analysts are projecting earnings of $1.87 this year, $2.00 next year, and 5% growth from there, so do the math. For this reason, analysts have an average 1-year price target of $13.25 on the company, which is 6.7 times projected 2013, well below RRD's historic valuation levels. This represents a 45.8% upside potential over current levels, and I believe this target to be very conservative. If RRD meets analyst expectations and turns in a few more positive quarters, I think the stock will gravitate toward the lower end of its historic EPS multiple, around 8.5 times earnings. Based on projected 2013 earnings, this translates to a target of $17."
See his full analysis at:http://seekingalpha.com/symbol/rrd/