Last time I posted on INFS I was pretty critical of the new CEO and stated that I am “seriously rethink[ing] my investment …. and I am considering cutting my losses.”
I still stand by my statements and more I think about the long term prospects for INFS the more I want to push the SELL button. However, the current undervaluation seems so egregious that I am willing to overlook the crumby business and less than inspiring CEO and hold on to my shares.
INFS reported fourth quarter earnings last week and posted an operating profit for the first time since anyone alive can remember. Excluding the $3.7M charge for lease losses on vacated facilities, INFS posted Operating Income of $1.1M or $0.09 per share in the company’s seasonally biggest quarter. Since I did not cover the 3rd quarter, I will cover both at the same time.
The financials broke down as follows:
Q3:2007 results
Revenue $76M -- down 7% YoY
GProfit 13.8
GMargin 18.2% -- vs. 16.3% in Q2, 10.9% in Q1, 12.7% in Q3:06
EBT $(3.56)
D&A 1.0 -- estimated number since no CF statement yet
EBITDA $(2.56)
Q4:2007 results
Revenue $81M -- down 3% YoY
GProfit 16.5
GMargin 20.4%
EBT $1.1 -- excluded $3.7M lease write-off charge
D&A 1.0 -- estimated number since no CF statement yet
EBITDA $2.1
Q4:2007 ASP=$856 94K units shipped
Q3:2007 ASP=$882 85K units shipped
Q2:2007 ASP=$1,022 72K units shipped
Q1:2007 ASP=$853 91K units shipped
Q4:2006 ASP=$1,090 79K units shipped
Q3:2006 ASP=$1,097 74K units
Q2:2006 ASP=$1,162 84K units
Q1:2006 ASP=$1,191 94K units
Operating expenses excluding the lease charge were $15.4M, which was the target set previously by management. Based on comments made on the conference call, investors should not expect any further significant improvements in gross margins and operating expenses.
The balance sheet continues to be a thing of beauty with $84M in cash and zero debt or $2.11 per share in cash. In addition to the cash on hand, INFS still has over $200M in NOL’s.
In this post I calculated that if only half of the NOL’s can be used over the next 10 years they are worth roughly $1.50 per share today. So a stock trading at $1.70 has approximately $3.50 in cash on hand and NOL’s. The company also has an intellectual property portfolio that maybe worth something.
While I am not particularly bullish on the long term prospects for this company I believe that the stock is currently trading substantially below liquidation value. INFS represents 2.75% of the “Best Ideas” portfolio at a cost basis of $2.03 per share. I will be increasing the weighting to 4% of the portfolio.
* DISCLOSURE: I or accounts I manage may be long or short any and/or all stocks mentioned in this post. This is not a recommendation to buy or sell any security. For informational and educational purposes only.
No comments:
Post a Comment