Copied from a board....where someone's is pitching the idea that this stock may end up being a 'homerun' in 2019....meaning....double/triple return in the next several months...

ticker MDCA

market cap $150. EV $1.30B

it's a holding co of ad agencies.

first the negatives of which there are alot:

1) leverage. it's like 5x leverage. kind of stupid but it is what it is. offset this is that the bonds are not due till 2024. and the business is suppose to generate cash in general.

2) agencies under attack - consultantcy, fb/amzn/goog, etc. you know the story. the offset is that MDCA is more on the creative side. harder to disintermediate this

3) no ceo. The current and expected to leave ceo isn't that good.

so what's to like -

valuation is pretty compelling. it trades cheap on an ebitda basis if you assume $215mm of ebitda next year. my expectation is around $225. so sub 6x. also trades pretty high fcf.

home run scenario - these guys are running a strategic review process. have been for a few months at least - and maybe from august. we should have more color probably in jan 2019. there is some chance, although small (10% is what i think) that this gets sold. don't bank on it.

more likely scenario is they run a process - and then end up hiring a new ceo.

the math on the free cash flow is as follows:

ebitda 225, interest around 80, cap ex 20, tax 10. Deferred acquisition cost 50mm. that's like over $1 per share in FCF that goes to pay down debt. DAC really declines after 2019 so it becomes even more attractive after that.

my guess is that they sell one of their top 5 agencies to pay down debt and hire a new ceo. i think this gets done in early 2019. it's worth a look.

i believe it's been sold for mutual fund tax loss selling and fast money liquidations.