Is DLH Holdings Corp. (DLHC) Trading at a Discount?
Investment management company Cove Street Capital recently released its “Small Cap Value Fund” third quarter 2023 investor letter. A copy of the same can be downloaded here. During the calendar third quarter of 2023, financial markets were chaotic, causing CSC shareholders to lose some gains from the first half, both relatively and absolutely. In the third quarter, the fund delivered -7.48% compared to a -5.13% return for the Russell 2000 Index and a -2.96% return for the Russell 2000 Value Index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Cove Street Small Cap Value Fund highlighted stocks like DLH Holdings Corp. (NASDAQ:DLHC) in the third quarter 2023 investor letter. Headquartered in Atlanta, Georgia, DLH Holdings Corp. (NASDAQ:DLHC) offers technology-enabled business process outsourcing program management solutions and public health research and analytics. On October 9, 2023, DLH Holdings Corp. (NASDAQ:DLHC) stock closed at $14.14 per share. One-month return of DLH Holdings Corp. (NASDAQ:DLHC) was 23.71%, and its shares gained 12.67% of their value over the last 52 weeks. DLH Holdings Corp. (NASDAQ:DLHC) has a market capitalization of $196.546 million.
Cove Street Small Cap Value Fund made the following comment about DLH Holdings Corp. (NASDAQ:DLHC) in its Q3 2023 investor letter:
"DLH Holdings Corp. (NASDAQ:DLHC) is a consultant that provides a wide range of public health and life sciences services to various Federal health agencies such as the Veterans Administration and Centers for Disease Control. It has added high margin cybersecurity capabilities via its acquisition of Grove Resources last year. This is an asset-lite, high free cash flowing business with generally sticky 3 to 5- year contracts. This company trades at a discount to its peers—despite having best in class margins— largely due to an overhang for a high revenue but low margin contract that comes up for renewal in the coming months. Our research indicates the stock is priced for a “worst case” scenario with respect to this renewal, and other likely outcomes present a high-upside case. Furthermore, management has been astutely using cash to acquire smaller players in adjacent capabilities— such as Grove—to diversify revenue across more contracts. CEO Zach Parker came in seven years ago when the company was doing $2m in EBITDA; they will generate somewhere between $30m to $35m this year. DLHC was a top performer in the third quarter as the management team continues to execute on its strategy and positions the company to be sold to a larger player."
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DLH Holdings Corp. (NASDAQ:DLHC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 8 hedge fund portfolios held DLH Holdings Corp. (NASDAQ:DLHC) at the end of the second quarter, which was 9 in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
