Dolan Media Company (DM) is making big profits from its counter cyclical mortgage default processing services. The company has surprised on estimates the last 3 quarters by an average of 36.30%. Dolan Media trades with a PEG ratio of 0.87.

Company Description

Dolan Media provides professional services and business information to the legal, financial and real estate industries. It has two segments: Professional Services and Business Information Division.

Professional Services consists of two subsidiaries, NDeX and Counsel Press. NDex provides mortgage default processing services in states with large numbers of distressed home owners such as California and Michigan. Counsel Press provides appellate services to the legal community.

The Business Information Division publishes journals and operates media web sites targeted to the business and legal communities in 21 geographic markets.

Dolan Media Expands Into Florida Market

On Oct 5, the company announced its subsidiary NDeX had entered into a long-term agreement to provide mortgage default processing services to James E. Albertelli, P.A., a Florida law firm with a staff of 91. The agreement began as of Oct 1.

The acquisition gives NDeX an entry into the Florida mortgage default market. Florida the number two state in the number of foreclosures.

Zacks Consensus Estimates Rise

In its second quarter results, Dolan Media raised its full year guidance forecast to a range of 83 to 91 cents from its May prior guidance of 70 to 80 cents.

Analysts have been raising third quarter and full year estimates slowly over the course of the last 3 months. The third quarter Zacks Consensus Estimate rose 2 cents to 16 cents.

For the full year, the Zacks Consensus Estimate jumped 41% to 89 cents from 63 cents. 2 out of 3 covering analysts have raised in just the last month. The estimate is now at the higher end of the company’s guidance range.

Dolan Media is scheduled to report third quarter results on Nov 6.

Revenues Soared 61.3% in the Second Quarter

On Aug 4, Dolan Media reported second quarter results that surprised on the Zacks Consensus Estimate by 117.65%. Earnings per share were 37 cents compared to the estimate of 17 cents.

Revenues surged based on the strength of the Professional Services segment which saw a gain of 144.3% year over year. This included a gain due to the acquisition of the Barrett-NDex operations the company acquired in September 2008 which operates in Texas, California and Georgia.

The Business Information Division saw revenues fall 2.9% year over year due to difficult advertising conditions.

Value Fundamentals

Dolan Media is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 13.6 and a price-to-book of 1.56. The company also has a solid 1-year return on equity (ROE) of 11.8%.

Zacks Investment Research
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