Today LOJN (current price: $6.90 – original write up August 2010 at $3.70) reported another strong earnings report providing further evidence of the company’s successful turnaround. Although management provided somewhat lower guidance than I would have expected given the recent results and the macro environment, it was clear from the conference call that management is simply being conservative following the tough business climate in the past two years.

Nevertheless, even with the current guidance of $155 million in revenue in 2011 and around $17 million in EBITDA, the stock appears undervalued at current levels, with an EV/Sales of 0.5 and EV/EBITDA of 4.6, despite 50% gross margins and reasonably low cap-ex needs. Notably, LOJN’s balance sheet continues to swell with cash, with cash at over $50 million, now comprising nearly 50% of the market cap.

Overall, the Market still seems to be pricing LOJN as if it has no growth potential, while in fact the company has enormous growth potential in several markets, including but not limited to, applications of the technology for missing persons (SafetyNet), international auto markets, and pockets of the US auto market that have not yet been really penetrated, i.e. used cars. I remain especially bullish on the company’s SafetyNet service (missing persons) and would hope management would get more aggressive with this business given the fact that they have the financial resources to grab a large market share in this burgeoning business.

In terms of upside, at current valuation levels, LOJN could easily become a takeover target for a private equity firm, a competitor, or a larger company looking to get into this business. I estimate that the auto side of the business alone should be worth $10 to $12 per share just based on the current numbers. With more than 50% upside for just the auto business, I plan to hold onto my shares of LOJN for awhile longer.

Disclosure: Affiliates of Envoy Global Research, and its principals, own shares in LOJN. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.