The Daily Mail owner has issued a series of profits warnings over the past year or so and has seen its shares fall by almost 20% as a result.
READ: Daily Mail and General places struggling, US property information business into Chapter 7 liquidation
Exane analyst William Packer said that makes the stock look undervalued compared to its peers, given that it is currently trading at about a 30% discount to some of them.
After having to slash forecasts in 2017, Packer reckons the company’s guidance for 2018 is “appropriately cautious”.
“After a disappointing FY17, the B2B portfolio outlook is in better shape for FY18 – e.g. solar headwinds receding, Xelligent closure, oil and gas events improving.”
On top of that, the analyst also notes that DMGT has been upfront with its issues which means there shouldn’t be too many unwanted surprises for investors this time around.
“We see a number of factors limiting downside in other divisions: I) the company now guides for limited RMS(One) monetisation in 2018; II) the company is conservatively guiding for a c5% revenue decline at DMG media, implying no price increases, a tough print UK ad market and a slowdown at Mail Online,” said Packer.
That’s in the short-term, but Exane is much more upbeat about the medium-term outlook for DMGT.
“In particular, at RMS(One) feedback from early adopters has been mildly positive, while significant losses going forward are included in our group forecasts,” said Packer.
The analyst added that the RMS business “retains significant long-term value”, while DMG events is still an “attractive asset in a consolidating space”.
As well as moving his rating up to ‘neutral’, Packer its thinks shares are worth 630p – considerably higher than his last target of 530p.
Shares were up 0.8% to 613p.