iGo's Q1 Proves Management Is Trying to Increase Shareholder Value

On April 29, iGo Inc (IGOI) announced earnings that were better than I expected considering they had previously lost their biggest customer, Targus. However, earnings wasn’t the number I was focusing on. It’s the assets I care about the most, because this is a deep value stock investment.

For people new to iGo Inc, you can refer to the first stock analysis of this very interesting idea. The 10-Q hasn’t been filed on Edgar yet, so I am basing my thoughts on the 8-K (press release).

Quick View Business Valuation

(click to enlarge)

With the latest numbers entered into the free net net investing spreadsheet above, the liquidation value of IGOI remains at $0.96. The closing price Thursday was $0.74 (ignore the $0.65 price on the image, it was created Wednesday night), leaving a 23% discount to its liquidating price. With operations generating cash, the downside is very limited.

Brief Income Statement Analysis

• Revenue and gross profit down from last year but this was expected and the numbers are not that bad.
• SG&A far too high for my liking at 40% of revenues.
• Didn’t receive any other income from litigation or from interest which is good. This way I can get a good indication of how profitable it can be.
• If the other income is ignored from the 2008 income statement, the total net loss is very similar to this year's result. Not bad considering everyone else is losing money down the drain.

Brief Balance Sheet Analysis

• Increased cash: great
• Decrease in short term investments by about 50%. Either they lost it or converted it back to cash for operations (only bad point I see at the moment)
• Accounts receivables slight increase
• Inventory management is steady
• Overall, a very slight decrease in assets due to the drop in short term investments

Brief Statement of Cash Flows Analysis

• The 10-Q isn’t available yet so no comment for now

Overall, nothing alarming jumps out like the way other net nets burn through cash, and the way the conference call went was also encouraging. It seems like management is planning some moves to try and increase shareholder value. I’ll have to listen to the conference call again to get a better indication of management trustworthiness.

See this file (pdf) to compare the past 5 Q1 financial statements, excluding this quarter.

Summary

• IGOI has done remarkably well considering the huge hurdle it faces in attracting new customers to overcome the Targus loss
• By valuing the assets of the business, the liquidation price still remains at $0.96. i.e. This is the minimum price it ought to be selling for
• Strong balance sheet
• Cheap!

Disclosure: I own shares of IGOI at time of writing