ITEX Corporation (OTCBB: ITEX) is the largest cashless barter exchange in North America for small businesses, similar to companies like International Monetary Systems Inc. (OTCBB: ITNM). Unlike many of its competitors, its business model has been consistently profitable for eight years, spinning off significant operating cash flows and trades at a discount to its intrinsic value.
Barter Industry has Tremendous Potential
Bartering is a great tool for companies that aim to conserve cash or are looking for new customers. Unfortunately, geographic limitations have held back the industry from its true potential for years. With more than 24,000 member businesses and 90 franchises throughout the United States, ITEX Corporation is assisting its clients with its online Membership Trading Communityplatform.
According to the International Reciprocal Trade Association, more than 400,000 businesses transacted $12 billion in barter transactions around the world in 2009/10. The number could grow substantially as entrepreneurs and small businesses discover the tremendous value in bartering. And as the largest U.S. barter exchange, ITEX Corporation is well-positioned in the market.
Profitable Play Delivering Shareholder Value
Last quarter, ITEX Corporation generated revenues of $3.96 million and net income of $239,000, or $0.07 per share. With earnings of $0.23 per share last year, the company trades with a price-earnings multiple of about 16x. When you take into account the $5.66m tax asset on the balance sheet, a better metric is income before taxes which was $1.557 last year, generating earnings of $0.44 per share and a price-earnings multiple under 10x. and the Company recently won an 8-year legal battle which should lower legal expenses going forward helping increase the bottom-line in the next fiscal year.
Meanwhile, the company’s balance sheet included $14.7 million in shareholders’ equity and more than $4.7 million in cash and equivalents. With a market capitalization of just $13.49 million, these figures suggest that the stock is significantly undervalued at its current levels. The company is working to improve its shareholder value through a 4.3% dividend (as of the date of this story) andshare buyback program.
A Great Investment Opportunity
ITEX Corporation operates the largest barter exchange in the United States with a profitable business model and active programs designed to unlock shareholder value. As a result, this is one company that investors may want to consider for their portfolios.
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