Down 64%, Dye & Durham Stock Is a Screaming Buy for the Long Term

Dye & Durham stock’s massive year-to-date losses make it look really undervalued to buy now and hold for the long term.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

The year 2022 is proving to be disastrous for tech investors, as most tech stocks are trading deep in the red. Inflationary pressures, growing geopolitical tensions, and the rising interest rate environment continue taking a big toll on investors’ sentiments. While most high-growth stocks on the TSX look undervalued to buy right now, let me highlight one of the best TSX tech stocks to buy now for the long term, which has seen over 60% value erosion this year so far.

Dye & Durham stock

Dye & Durham (TSX: DND) is a Toronto-based software company with a market cap of about $1.1 billion. Its stock currently trades at $15.96 per share after losing 64.4% of its value in 2022. Nonetheless, DND stock still trades 113% higher than its July 2020 initial public offering price of $7.50 per share. This tech firm primarily focuses on providing cloud-based technological solutions for legal and business professionals. Its software solutions help these professionals automate workflow to improve efficiency and productivity.

Based on its fiscal year 2021 (ended in June 2021) sales data, Dye & Durham made nearly 61% of its total revenue from Canada, while the remaining 28% and 11% came from the United Kingdom and Australia, respectively.

The recent growth trends in Dye & Durham’s financials look impressive. While the company hasn’t yet announced its June quarter results, in the third quarter of its fiscal year 2022 (ended in March), the tech firm reported a 78.3% YoY (year-over-year) jump in its total revenue to $122.9 million. Despite tough real estate market conditions, the recent rise in its total revenue was primarily driven due to increased revenue synergies from its quality acquisitions in the last year.

With the help of rising sales, Dye & Durham also registered a solid 77.6% YoY increase in its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the March quarter to $66.8 million. More importantly, the Canadian software firm maintained a more than 50% adjusted EBITDA margin as it stood at 54.4% in the last reported quarter.

Why DND stock looks undervalued

Dye & Durham currently has a large customer base of more than 50,000 businesses globally, including government organizations and blue-chip companies from the legal and financial services industry. The company is striving to expand its customer base further by making new acquisitions and retaining its existing customers.

In December 2021, Dye & Durham announced its intention to acquire the Sydney, Australia-based superannuation administration industry-focused firm Link Administration Holdings for a cash consideration of AU$5.50 per common share. However, the Canadian company lowered its acquisition price to AU$4.81 per Link Group share in July. Its revised offer was overwhelmingly approved by Link Group’s shareholders this month. Dye & Durham expects this deal to enhance its presence in cloud-based workflow software and digital infrastructure space across the globe, which should help accelerate its financial growth in the coming years.

Despite all these positive factors and its strong growth outlook, DND stock’s massive year-to-date losses of more than 60% make it look really undervalued at the moment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Tech Stocks

Maxar Technologies
Tech Stocks

2 Incredible Deals for Your TFSA Today

Investing in MDA Ltd. (TSX:MDA) could increase capital gains in a TFSA account, and here's one REIT to boost tax-free…

Read more »

Online shopping
Tech Stocks

Rebound Rockets: 2 TSX Tech Stocks to Buy Before They Soar

Beaten-down TSX stocks such as Lightspeed and Shopify should be on the top of your shopping list given they remain…

Read more »

stock research, analyze data
Tech Stocks

3 No-Brainer U.S. Stocks for Canadian Investors

Tech stocks may not seem like the best option right now, but these U.S. stocks are simply no-brainers in this…

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

3 TSX Tech Stocks That Could Soar

The tech sector is still heavily discounted, though the scale of discount and recovery potential may vary significantly from stock…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Tech Stocks

BlackBerry Stock: Top Things to Watch in its Q2 Earnings Report This Week

Here are key factors investors may want to watch in BlackBerry’s Q2 earnings report this week.

Read more »

a person watches a downward arrow crash through the floor
Tech Stocks

Why Dye & Durham Ltd (TSX: DND) Stock Has Tanked by 42% This Quarter

On a year-to-date basis, DND stock has slipped by 72%

Read more »

Tech Stocks

TFSA: 3 TSX Stocks That Could Turn $10,000 Into $100,000

All it takes to build a $100,000 TFSA investment portfolio is $10,000 and time.

Read more »

Tech Stocks

Nasdaq Bear Market: Is Apple Stock a Buy Right Now?

Investors looking to buy blue-chip stocks with a strong growth profile can consider purchasing Apple shares right now.

Read more »