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$5.02 -0.48 (-8.73%)
11/21/2008 3:58 PM

iMERGENT, Inc. (IIG)

CAPS Rating:
*

An eServices company that provides eCommerce technology, training and a variety of web-based technologies and resources to small businesses and entrepreneurs.

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Avatar srzehner (83.75) Submitted: 12/31/06 11:58 PM : Underperform Start Price: $27.11 IIG Score: 34.79

Used to work for a shopping cart software company. The problem was getting the small biz customers to pony up. For ex: look at the latest 10Q and 10K: the allowance for doubtful accounts grew more than 3x faster than sales over the last two quarters. The company expects to collect only 65% of its existing receivables, and that rate is decreasing. With pressure to increase sales, the sales force will likely bring in ever more credit-challenged customers. The key will be to watch the Cash Flow Statement and a growing disparity between net income and cash used in ops. Wouldn't surprise me to hear unflattering deflating noises over the next few quarters...

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Avatar brightidea2006 (33.05) Submitted: 1/05/07 12:04 AM

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I'm impressed that you actually looked at the filings/financials. Do you understand their accounting? I presume you noted this is modified cash accounting. Approx. 60% of sales are cash sales, 40% are financed. Under this accounting, the entire amount of a financed sale is booked into receivables and deferred revenues and amortized of a 2 year period. That means, no revenue is recognized until ANY cash is collected. If sales are growig fast, that means they are collecting cash. It is hard for me to see that you understand how the balance sheet is working from your statement above

Further, since all the costs incurred are all charged immediately, anything they collect is pure gravy from "uncollectable" customers.

Contrary to your statement about credit challenged customers - go to their website and look at the transcripts of the calls - they have been showing a consistent trend of selling to higher credit worthy customers and decreasing their reliance on credit sales (2 years ago it was 60% financed, 40% cash).

It is refreshing to see a long line of uninformed speculators comment on this stock because it means it will go undiscovered for a long time. Their numbers will continue to speak for themselves.

I have owned this since $3.50 and I am long well beyond $50.

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Avatar FourthAxis (77.73) Submitted: 1/06/07 2:16 PM

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I applaud you for riding this bull so far and I know it has more upside because of the short squeeze, but I think srzehner may have a point. If you've owned the company since $3.50, you probably know where they were before $3.50 and how they got there...

Bad business and bad accounting. I wouldn't trust anything the books say. This company has no major analyst coverage to verify the cash. Not to mention lawsuits and SEC investigations. If they have killed off 33% of their revs (credit customers) where is the money coming from now? Europe?

If you want to ride momentum, I'm not going to knock it, but learn about what this company REALLY does, before you follow along behind the earnings calls.

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