Too Good to "V-Tru"?

Vertrue (VTRU) – I wondered, “what on earth does this company do?” You know, I read their profile (Profile) and I am still not sure I understand. “Consumer Services Marketing”, sounds like a fancy name for Spam, unsolicited telephone calls and junk mail. But I won’t hold that against them… let us see if they make money.

• Revenues increased this quarter 10% Y o Y.
• They raised guidance for 2006.
• Net income decreased 5% due in part to FASB 103. I have been seeing this in a bunch of earning reports as companies now have to expense options. I call it “The World According to GAAP”.
• Market Cap: $374m
• Current Price: $38.27 vs. 52 week range of $33.33 to $45.39
• Current Ratio = .666

I think I need go no further. Like FTD, these guys are in hock to their eyeballs. They have assets of $466m, of which $268m are intangible. They have liabilities of $490m, of which $237m is long-term debt. In fact, even with their soft and squishy intangible assets, their total equity is below zero!?! In accounting lingo this is called a “deficit”, a term all US citizens should be familiar with. In Justadrone lingo, this is called, “Run Away!”

This is the 2^nd company from the MFI list that has really been in debt with few tangible assets. I will be watching these companies to see how they fare. I guess they do well per MFI as the formula in a weird way values intangible assets higher than tangible assets as you don’t need to invest more capital in them. Maybe I have an unfair bias against these companies in debt. A year from now, I’ll review these postings and see if I was too harsh.

Meanwhile, I will sound the gong! Next up, RAIL.