Iteris: Accounting Delay Offers Compelling Entry Point
- 10-k was delayed due to a mix of bad luck and poor execution; however, we do not see this delay impacting the intrinsic value or being a harbinger of further bad news.
- Our research indicates the revenue recognition question only impacts the timing of revenue and pertains to less than 2% of total revenue.
- Our research also indicates the financial data on the cash flow statements and balance sheets is correct and will not be restated.
- The underlying business is experiencing fundamental strength. With stock trading below book value and pristine balance sheet ($20m in cash and zero debt), we see an attractive risk/reward profile.
- We estimate the intrinsic value for ITI is $2.40 per share or +55% upside.