10/27/2014

Cheap For a Reason or Too Cheap?? Intersections (INTX)

Intersections Inc.(NASDAQ: INTX) provides subscription based consumer protection services that help consumers understand and monitor their credit profiles and other personal information and protect themselves against identity theft or fraud.
Source Morningstar

Furthermore later this year INTX will offer a pet heath monitoring platform for dogs along with their other existing segments for bail bonds industry solutions, and customer loyalty programs.

A major risk and partial rationale for the large short position is revenue concentration and declining subscriptions. Bank of America accounts for 45% of revenue and the remaining up to 70% of total revenue are in the hands of a few US financial institutions.   

Intersections’ mean reverting attributes, 52 week change -56.23%, stock price near 5 year low, P/B and P/S near 3 year low. Another measure of cheapness I use is enterprise value to total non cash asset. The rationale is that by definition these historical transactions are classified as assets because they have value that will generate future benefits.
Current…  EV/Non Cash Assets = .82, 2011 EV/ Non Cash Assets = 1.77
Total liabilities have been reduced to 1.90 per share from 5.44 per share in 2009. P/B at 1.64 for the period ending 2010 currently trades at .80.  Share count has remained stable, slightly reduced from a share count of 19.20M 2009 to the MRQ of 18.50M. The trailing dividend of 0.80 or 21.00% is likely to be reduced or eliminated.

Positive insider activity during September 2014, OSMIUM PARTNERS purchased 677,292 shares for $2,598,676 or for an average price of $3.84 per share. Additionally, Director David McGough purchased 10,000 shares for $38,600 or $3.86 per share.

Additional Negatives:
High short interest at 41% of float, declining margins, TTM GM% of 66.2% down from a 2011 70.30%, 12.63% average ROIC from 2010 to 2013 (16.54   15.13   16.42   2.43) to the TTM ROIC return of -6.01%.  Qtrly Revenue Growth (yoy):-20.30%, revenue concentration risk along with regulatory changes.

Market Cap: 72.38M , Enterprise Value:  59.05M
Price/Sales (ttm): 0.25 , Price/Book (mrq): 0.79
Enterprise Value/Revenue (ttm):  0.21 , Enterprise Value/EBITDA (ttm): 6.76
Revenue (ttm):  278.26M , Revenue Per Share (ttm):  15.24
Qtrly Revenue Growth (yoy):  -20.30% , Gross Profit (ttm): 205.11M
EBITDA (ttm): 8.74M
Total Cash (mrq):  13.44M , Total Cash Per Share (mrq): 0.73
Total Debt (mrq): 1.96M , Total Debt/Equity (mrq):   2.19
Current Ratio (mrq):   1.69 , Book Value Per Share (mrq):  4.83
Operating Cash Flow (ttm):  12.43M , Free Cash Flow (ttm): 29.63M
52-Week Change:   -54.95%
52-Week High (Jan 14, 2014):9.10 ,52-Week Low (Sep 2, 2014): 3.32

Shares Outstanding: 18.51M , Float:  7.53M
% Held by Insiders:    10.77% , % Held by Institutions:   42.50%
Short % of Float (as of Oct 15, 2014): 41.00%
Forward Annual Dividend Rate:  0.80
Trailing Annual Dividend Yield: 0.40 , Trailing Annual Dividend Yield: 10.50% likely to be reduced or eliminated.

No position

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