Wednesday, February 24, 2010

ION Geophysical spikes on insider buying (IO)




ION Geophysical (IO) shares are getting a midday lift, after Director James Lapeyre disclosed that he bought 50,000 shares on the open market.  Always nice to see insider putting their money alongside other shareholders, as it often signals that they find the stock undervalued.

The shares are down a painful 37% from their early January highs, and the Feb17th earnings report was ugly:



So are the shares undervalued?  Not compared to other companies with the same gross profit dollars.  ION trades a slight discount to them on Price-to-Sales, likely due to it's uglier balance sheet.  Market cap after subtracting cash, divided by gross profits, shows a much more generous valuation for ION than the others.  And it's not just due to recent gross margins either - this group's average 5 year maximum gross profit margin is 42% versus ION's 37%....


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