It was another quiet day in the market as the expectation of QE2 continues to dominate the headlines like Securities Analysis dominates the insomnia drug market or like Gabourey Sidibe dominates a doughnut (or box of doughnuts to be more precise).  The market still can’t figure out what to do as investors continue to oscillate between delusion and ecstasy over the Bernanke Put which seems primed to lower real rates until they drop further than Meg Ryan’s boobs.

The good news is that even though equity flows continue to be negative, even though HFTs continue to make up the majority of trading volume thus making the term “fundamental value” more antiquated than proper manners, waiting for marriage, and Wilford Brimley‘s petrified prostate, and even though the economy continues to stumble for the bottom like a drunken hobo with an ass fetish, at least Wall Street is set for a record high $144B payout to employees because they did such a good job destroying the global financial system, getting bailed out by a sovereign nation, and being a bunch of asshats (so yes, that was sarcasm).  That fucking payout, even as profits dwindle, should be inconceivable to everyone except for perhaps Lloyd Blankfein.

The only real news today was that the Fed released the minutes from their 9/21/10 meeting and in it we learned that “the staff lowered its projection for the increase in real economic activity over the second half of 2010,” “many participants saw evidence that the current unemployment rate was considerably above levels that could be explained by structural factors alone,” and “due to new hazing laws, Janet Yellen will not have to put on the Wonder Woman costume and drink the juice as part of her initiation as vice chairperson.”

The interesting part for Money McBags seemed to be that there was some real debate as to whether things need to maintain as is or get a fuckload worse for the fed to take action with Thomas “T Ho” Hoenig showing off his strong pimp hand by taking the “fuckload worse” argument and everyone else arguing the things need to maintain side.  While there was some discussion about the best way to accomplish the next Fed intervention, the committee was “focused primarily on further purchases of longer-term Treasury securities and on possible steps to affect inflation expectations” in addition to focusing on “shutting Thomas Hoenig the fuck up.”

But the Fed did leave themselves some wiggle room by saying “ In light of the considerable uncertainty about the current trajectory for the economy, some members saw merit in accumulating further information before reaching a decision about providing additional monetary stimulus.“  Of course the Fed has been telegraphing QE2 worse than a Ryan Leaf pass so that last bit of hedging was likely just for show, like a public hand holding by the Clintons or the nazi uniform worn by Ohio candidate for congress Rich Lott, so he claims (and as readers of the award winning When Genius Prevailed know, Money McBags lights to menorah so Mr. Lott, a sincere fuck you for being such a douchenozzle).

So there we have it, some marginally interesting insight in to the last Fed discussion where the only things in which Money McBags is confident are that that Natalie Blair is hot and that no one has any fucking idea what they are doing and how this is going to turn out because apparently they don’t make textbooks for stuff like this (oh wait, what’s that?  They do?  Well then maybe we can get the fucking guy who wrote the textbook to fix this clusterfuck of a situation we’re in.  Oh wait, what’s that?  He has been in charge.  Well I guess we’re all fucked).

Internationally, Greece was able to sell $1.62B of bonds which was ~4x more than they expected and at lower yields than last month as they included a free Julia Alexandratou sex tape for the first hundred buyers.  This is a positive sign for a country that was as close to extinction just a few short months ago as it had been since the Battle of Cunaxa way back in the day but it’s still way too early to pop the ouzo and light the saganaki to celebrate Greece being back in solid financial standing.

In the market, SBUX pepped up by ~4% as analysts from Credit Suisse and Sanford Bernstein both touted SBUX’s Via products as being a potential engine of growth beyond the traditional retail stores, King Pharma rose 40%+ after Pfizer bid $3.6B for the company (thus ending King’s painful struggles to grow their business), and AXP charged up by ~1.5% as it tries to rally from the recent sell off due to the Justice Department’s lawsuit.

In small cap news, ININ pre-announced a huge Q3 which caused shares to shoot up faster than William Burroughs in the 1950s or Sara Varone‘s popularity on National Hug a MILF day.   The stock was up ~25% as they (might have) demolished analyst guesses of $.23 per share for Q3 by saying adjusted net income will be between $.35 and $.39 per share.  The problem is that Money McBags does not know if analyst estimates were off of ININ’s Non-GAAP calculation which adds back stock comp and then strangely adds back taxes but keeps in depreciation (so it’s not quite EBITDA).

GAAP eps will be between $.18 and $.20, stock comp adds back another $.06 per share and taxes another $.11 to $.13 per share.  So Money McBags would call EPS more like $.24 to $.26 per share because he is less clear about why taxes would be taken out than he is about why GOOG is fucking around building a robot car (unless they are huge fans of car head, and why wouldn’t they be, and also want to flash ads at drivers across the dashboard so would like them to not have to pay attention to the road while they’re driving).  Anyway, revenues are going to be between $41MM and $42MM which is 10% above analyst guesses and this will be up~25% from last year which means that something is finally fucking working because the company has basically had flat to 10% growth for the past 3 years.

Money McBags used to own this stock ~2 years ago but he is a bit hazy on their business to date (and he’s a bit hazier on whether Courtney Cox is available to date) but when fishing in small cap waters, one needs to pay attention to pops like this on good news and see if these do shit companies can build a base.  The company said they are getting better operating leverage because of bigger deals with nine deals of >$1MM and they are seeing continued strong demand for their cloud-based communications offering.  They gave guidance for the year of 20% top line growth so if they bring in ~$42MM in revenue in Q3, that means to get to 20% above last year’s $131MM, they are forecasting ~$42MM revenue in Q4 as well which would equal 17% growth in that Q.

So assuming no major operating changes, ~$42MM in revenue yields $.25 eps (adding back stock based comp) so the company should be at ~$1 run rate eps and is now trading at ~22x that, so not cheap.  But that assumes no additional growth.  So Money McBags is going to do a quick exercise here, basically thinking out loud (though if he were really thinking out loud, all you would hear is “Yes Alice” and “Right there Alice” ) based on absolutely no insight other than fucking around with ININ’s numbers so take this for what it is worth.

With the 20% top line guidance, that puts ININ at ~$157MM revenue for this year.  Let’s say this up market strategy is something new and real and they can grow 20% next year too.  Gross profit margins have been ~70% and their operating costs are on a ~$22MM quarterly run rate, so let’s gross them up a bit and call the annual operating expense for 2011 $92MM.  Throw on a 40% tax rate and use 18.7MM shares and you get ~$1.28 per share estimate for next year.  To make life easier, we’ll also assume stock based comp runs at $.06 per Q per share so an operating eps for 2011 can look closer to $1.50 in what seems like fairly aggressive and completely out of Money McBags’ ass assumptions.  That means the stock is now trading at ~15x that, which seems perfectly reasonable.

As for EBITDA, depreciation has been running ~$8MM per year, so add that and stock comp back in to operating earnings and you’re at ~$52MM operating EBITDA (and those are very rough numbers) and the company has $85.5MM cash, no debt, and a $400MM market cap so it is trading at ~6.5x EV/total swag at 2011 EBIDTA, so not terribly priced for 20% growth (of course, Money McBags has absolutely no idea if that 20% growth is achievable).

So what the fuck do we do with this company as the stock price has been more up and down than Tori Black in I Wanna Bang Your Sister and it’s now at the top of the range.  There are really only three things to do:  1.  Put it on your watch list and see if it can build a new base.  2.  Tune the fuck in to their conference call to hear if they give any color around 2011 and if they are in a new growth trend.   As we saw, the stock is sort of reasonably priced for some very quick assumptions on 20% growth, so there could be some value here if they can help us understand the underlying business trends a bit better.   3.  Love some NSFW strangers (and remember, Money McBags is morally and contractually obligated to link to that once a week).

One last note to readers, Money McBags apologizes for getting the columns out so late recently, he hopes that changes but his schedule is a bit fucked right now.  He is aware some of the timeliness is lost by not getting it up earlier, but the column remains free, so it is what it is.  If every reader were to donate just $.10, Money McBags could probably get the column out ~10 minutes earlier, so just something to ponder.

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