Quietly profitable microcap tech stock ITEX Corporation (OTCBB:ITEX) has recently received some much-deserved attention from an up-and-coming activist value investor.

Tiny $16-million market capitalization ITEX has spent the past few years quietly plugging away at building the largest online marketplace for cashless business transactions in North America. ITEX’s business services and payment systems enable roughly 24,000 member businesses to trade goods and services valued at more than $270 million without exchanging cash. Much like eBay Inc. (Nasdaq:EBAY), ITEX generates revenue by charging percentage-based transaction fees on members’ purchases and sales using its system. ITEX also charges association fees.

A combination of acquisitions, cost-cutting and organic growth has helped ITEX post increased operating income every year since fiscal 2004. For fiscal 2007, Bellevue, Wash.-based ITEX posted revenue of $14.2 million and operating income of $1.5 million. Cash flow from operations topped $2 million. Over the past four years, ITEX shares have gained an impressive 350%, yet the stock still looks inexpensive by almost any valuation measure. Perhaps not surprisingly then, ITEX has become a recent object of affection for activist value investor Sardar Biglari of the Lion Fund. Last December, Western Sizzlin Corporation (Nasdaq:WEST), a small-cap restaurant company turned investment holding company for Biglari, announced an exchange offer . . .

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