IO Hits, IMA Misses

Good news first.

IO Met Earnings expectations and beat on Sales
* EBITDA rose 53%. I point to this instead of EPS because of a significant one time tax charge
* Sales up 26%
* Gross Margins rose from 30% to 32%

Guidance is in line - robust demand leading to 15~15% sales growth.
I don't like the results or guidance. We are leaving.

Speaking of leaving, the other stock I discussed leaving - IMA - reported earnings. Well, we should have left. They dropped 22% before ending down 16%.
* Revenues grew 80% on the back of the acquisition binge. They beat expectations by 7%. They are now a $1B sales company. That should get them more fund awareness (a lot of funds filter at $1B).
* Earnings rose 18% excluding 1 time charges for acquisitions and such. Analysts expected $0.38. However, they ended up with an actual loss of $0.19. A pretty big miss.

The new acquisitions drove almost all the sales growth. That's not good to see the core busines stalling. However, they are driving costs down by moving production to China and layoffs. The result: margins surged to 53% from 45%.
I like that business approach - buy a business, streamline and increase profits. That's the way it should be. Beyond the COGs improvement, however, they need to handle the operating costs. This is happening, but the EPS hit is huge.

I also like the new product rollouts - one in a few months as part of the P&G joint venture and another towards Q4.

So how do we value a barely profitable company doing >$1B in sales? And with $1B in debt?