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Analyst Blog Watch: Analyzing International Monetary Systems

August 18, 2010 (FinancialWire) (Investrend Forums Syndicate) (By Gary Vassalotti, LIFA) (Go to http://infoescrow.net/f/?u=http://www.financialwire.net/?s=cmmtry for all recent commentaries.) – In my previous post I began our discussion on how an analyst embarks upon researching potential investment candidates, noting that I had selected International Monetary Systems (ITNM.OB), a “barter exchange” company that owns, manages, and operates trade exchanges (barter networks or financial service firms), which permit companies and individuals to exchange goods and services utilizing an electronic currency (“trade dollars”), to be the subject company for our discussion.

Also in my pervious entry, I spoke about the lack of shoppers at a local mall. In relation to analyzing a company like ITNM, noting that lack of shoppers may seem to be a disconnected topic, but it really isn’t.

The barter industry can actually be busier during slower economic times, as merchants begin to trade unsold or excess inventory for other goods and services. Conversely, I should note that a strong economy can be positive as well, and should also be looked at in-depth. However, keeping the focus on the current economic situation, slow stores that contain only employees is a strong indicator — even if only locally observed and statistically insignificant — that at least some merchants will have some excess inventory. Such an indicator, if proven true on a broader scale, bodes well for barter companies, and sets the groundwork for further study.

When looking at an investment candidate, first steps in our process should include determining that candidate’s market, its potential market size and the health of that market. In the case of barter companies, one indicator leading us to that determination may be the slow economy (higher unemployment rates, slower retail sales). ITNM is based in the Midwest and serves markets in California, Canada, Colorado, Connecticut, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nevada, New York, Ohio, Tennessee, Virginia, Washington D.C., Wisconsin, and Massachusetts, as well as parts of Canada. Most of those locations are feeling the effects of the U.S. economy, and may indicate some market strength for barter.

A next step in our process should include looking at statistics from the Federal Reserve and other government agencies. This step can take time and can be pretty involved. So, for our purposes, I’ll focus our discussion more on the broader strokes and the trends that can be revealed.

Looking at Federal Reserve and other government agency statistics as relevant to our analysis, a positive indicator for ITNM may be a sales slow-down in these areas, so we look at sales numbers over a 3-5 year period and determine whether a percentage growth or percentage decline has been occurring. That trend number can be used to establish a rough growth/decline number to apply toward projections for the next year, along with some subjective input on current strengths and trends.

The result of our growth/decline analysis will provide a directional reference point when we look at the company's financials.

Next week we’ll start to look at balance sheet issues and analyze those numbers. We’ll look at sales and revenue trends, debt levels and related trends, current expenses’ growth/decline, as well as the bottom line: per-share earnings and their growth/decline over time. If those preliminary calculations reveal positive results, then a more in-depth study on ITNM will be indicated. If that’s the case, then the real research work will begin.

Source: Investrend Weblogs (http://www.investrendweblogs.net/vassalotti/).

Other FinancialWire(tm) news about International Monetary is accessible via The FinancialWire(tm) search function (at http://www.financialwire.net/?s=itnmtcb), additional information and independent research on International Monetary is available via Investrend Syndications (at http://www.investrend.com/synd0006), and official information and company filings from International Monetary are accessible via the SEC website (at http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001097430).


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