First You Get The Sugar, Then You Get The Money (IPSU)

Sugar, the commodity, is getting smacked today, down 9%, but so are shares of Imperial Sugar Company IPSU. Sugar is obviously IPSU's main input cost, and one would think that when the price of sugar is going down, the share price of IPSU would go up. This is something to keep an eye on, as IPSU has absurdly low valuations and a solid balance sheet to support it. A further look into the company's finances shows decent cash on hand, manageable debt, but negative free cash flow, something to keep an eye on. It trades at an absurdly low 1.2 times earnings, but this relates to a one-time insurance settlement relating to a 2008 plant explosion in Georgia. The company has a negative operating margin, but if the price of sugar continues to come down, this would turn around, as I said previously, the commodity is its biggest input cost. This company could be a diamond in the rough, but investors would be wise to position small until they see a meaningful turn around in the price of sugar. Disclosure: no position