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DHX Media's Rastamouse has been licensed to more than 40 broadcast territories since its debut in January 2011.  (DHX MEDIA LTD.)

DHX Media's Rastamouse has been licensed to more than 40 broadcast territories since its debut in January 2011. 

(DHX MEDIA LTD.)

Schizas’ Mailbag

DHX Media shares may have a long way to fall Add to ...

Lou,

What’s your take on DHX Media?

Thanks,

Mark

Hey Mark,

Thanks for the assignment.

DHX Media Ltd. is a micro-cap company that has built a position in the children’s television market. They have made a series of strategic mergers and acquisitions that have grown their portfolio of character brands which includes ” Caillou” and “Johnny Test”. The company has 8,500 half hour shows that they have licensed to major broadcast groups such as Disney, PBS, and Nickelodeon.

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Things to keep in mind include a high multiple assigned to the stock. The price-earnings ratio is 68 which means that the expectations for growth are heightened and need to be met. The company also has thin coverage on the street and good but not great trading volume.

A run at the charts will better inform my take on DHX.

The three-year chart illustrates a robust advance that started in late December of 2011 when the shares were trading at $0.73 producing a three bagger in little over a year. Sweet! The move from $1.60 in December of 2012 was signalled by both the RSI and the MACD. Currently the momentum indicators are suggesting a cautious approach.

The six-month chart depicts a stock that has gotten way ahead of its moving averages, which means that if it started to pull back it would give up a lot of ground before there was anything it could grab a hold of. The MACD and the RSI have turned lower indicating that at least for the moment all the buyers have become exhausted.

Personally I would not be chasing this one. DHX looks to be taking a breather and investors who caught the ride at $0.73 may decide to book profits when they are available. The company is scheduled to report third-quarter results in May which will provide the next significant flex point on the calendar.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

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