Itex (OTCPK: ITEX) fell to a low of $3.03 today from yesterday’s closing price of $3.61 (a 16.1% plunge), down over 25% from its highs earlier this month – though it has since rebounded to $3.47 as I write this. The ITEX 10-Q filed with the SEC prior to today’s open indicated a year-over-year drop in revenue from $2.814 to $2.564 million (8.9%) for the quarter ending in October, as well as a decline in net income from $155 to $136 thousand (12.3%).

Significantly, however, the company’s cash flow from operations actually increased year-over-year for the October quarter from $360 to $363 thousand. Multiplying ITEX’s price of $3.47 by its 1.965 million weighted average shares outstanding results in a market cap of $6.82 million. Annualizing the most recent quarterly cash flow gives us $1.45 million and an annual cash flow yield of 21.3% ($1.45 divided by $6.82).

I feel that annualizing the quarter’s cash flow is appropriate, since its revenues were very close to ¼ of revenues for the year ending in July, $2.564 million being 23.1% of $11.110 million.

It should also be noted that ITEX indicated a cash balance of $3.655 million, enough to pay off all $1.452 million of its liabilities and still have over $2.2 million in cash left over. In the absence of special dividends and/or stock buybacks, I would expect ITEX’s interest income to become increasingly significant as interest rates rise.

Needless to say, I believe ITEX stock is a tremendous bargain at its current price, and I own it.

In this week’s ratings, ITEX is in the top decile of stocks to consider for purchase. Of the 3115 stocks covered by this week, ITEX was ranked #44.