APCO competitor ISTN owns a possible Web IPO
At $8 per share, we can essentially buy ISTN's profitable core business for $1 ($8 - $7 in unrestricted cash) and get its undiscovered web business for free!
ISTN provides warranties for new and used cars, manufactured homes, boats, r.v.s, etc. But the really exciting part of the story is the value of ISTN 2 websites relative to the value of 2 recent $1 billion IPOs. ISTN owns 2 websites: one that sell warranties direct to consumers, and one that locates cars and dealers for consumers. Within the last 4 weeks, 2 similar companies have gone public with home-run IPOs!. Autobytel (ABTL) traded as high as $58 per share, giving it a $1 billion market cap, and Autoweb.com (AWEB) traded as high as $50 per share, yielding a $1.2 billion market cap. Both of these companies lose money. Meanwhile, ISTN generated $11 million in cash flow last year while revenues increased 30% to $49 million and net income increased 55% to $3.3 million. At $8 per share ISTN is valued at 1 times Price/Sales, and has a trailing P/E of 12.
Although the company doesn't publish data on its web businesses, given the extreme valuations placed on unprofitable internet companies, and the relatively early stage at which private companies are able to come public, how can management resist pursuing its own IPO?
Last week, Ford and General Motors each announced strong first-quarter earnings that outpaced analysts' forecasts, powered mainly by a strong North American auto market. This news is a clue that demand for ISTN's warranties should also be strong. Furthermore, APCO, a competitor of ISTN, recently announced that it will meet or exceed Street estimates, another clue that the market environment is favorable for ISTN.
What's not to like?
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