Arch Communications Group Essay Example | Topics and Well Written Essays - 1000 words

Arch Communications Group - Essay Example As the research declares still consider Arch to be a sound buy. One of these analysts is John Adams, at Wessels, Arnold & Henderson, who believes that Arch’s stocks are undervalued. In his analysis, using EBITDA, Adams concludes that the company’s stocks are still a profitable investment because of its impressive historical growth. This implores investors to ask if Arch’s stocks were undervalued. In Adams’ valuation estimates, where he presents a ten-year horizon long estimate of Arch’s cash flow until the year 2005, this seems to be the case. This paper explores that EBITDA trends of the top paging companies highlights Arch as having one of the highest EBITDA margins in 1995 – a staggering 37% similar with Pagenet, the largest paging company in the country. Arch was also presented to have the highest growth rates in the industry at a 273% subscriber growth rate, 224% revenue growth rate, and 303% EBITDA growth rate, all of which are significantly higher than its competitors. Its Enterprise Value / EBITDA ratio is also the second highest at 18.9, second only to MobileComm, at 27.8 in 1995, and its Enterprise Value / Subscriber ratio is projected to be the highest in 1996 at $422, significantly higher than the average ratio, which is at $326. Based on these values, one can see a clear picture of Arch’s position vis-Ã  -vis its competitors in the industry. By using EBITDA margins to draw comparable conclusions regarding Arch’s value against competing companies in the industry, it failed to consider seve ral factors.