Despite a lukewarm economy and jobs situation, the staffing industry along with small cap staffing stocks like On Assignment, Inc (NYSE: ASGN), Kforce Inc (NASDAQ: KFRC) and up and coming Staffing 360 Solutions Inc (OTCBB: STAF) have actually put in pretty decent performances since the end of the financial crisis. I should mention that globally, staffing companies generate about $280 billion in annual revenue and there are approximately 70,000 private employment services agencies around the world with the top 10 companies accounting for about a third of total industry sales while in the USA there are an estimated 15,000 staffing companies generating less than $20 million in revenues. Overall, Europe is the largest regional staffing services market with 40% of annual revenue, followed by the United States.
With that in mind, here is a look at a couple of interesting small cap staffing stocks:
On Assignment, Inc. A leading global provider of in-demand, skilled professionals in the growing technology, healthcare and life sciences sectors, small cap On Assignment, Inc has a network of branch offices throughout the United States, Canada, United Kingdom, Netherlands, Ireland and Belgium. Back in April, On Assignment, Inc reported a 15.9% revenue increase to $439.3 million (9.8% on a pro forma basis that assumes the acquisitions of Whitaker Medical, LLC and CyberCoders Holdings, Inc in December 2013 occurred at the beginning of 2013) and net income (which is comprised of (i) income from continuing operations of $14.0 million and (ii) the loss from discontinued operations of $0.1 million) of $13.9 million verses $24.6 million in the first quarter of 2013 (Note: Net income for 2013 included a $14.4 million gain on the sale of our Nurse Travel division). The President/CEO commented:
"We reported strong financial results for the quarter despite the effects of the inclement weather. Our IT segments continue to report strong performance led by our Apex Segment, which grew 16 percent year-over-year. Demand for our IT services continues to be robust and we are well positioned to expand our market share."
In addition and back in March, Wells Fargo analyst Ed Caso upgraded the stock from Market Perform to Outperform with a price target of $41 to $43 ($34 to $35) and commented:
"We believe On Assignment is well positioned for above-market growth and gross margin due to its focus on the attractive IT (80-85% of revenue) and healthcare and life sciences (15-20% of revenue) markets. We see the potential for steady EBITDA margin expansion over time given extension of permanent placement work and systems integration."
On Wednesday, On Assignment, Inc rose 1.49% to $35.31 (ASGN has a 52 week trading range of $24.81 to $39.86 a share) for a market cap of $1.92 billion plus the stock is up 3.4% since the start of the year, up 36.4% over the past year and up 127.9% over the past five years.
Kforce Inc. Specializing in the areas of technology, finance & accounting and health information management serving commercial and government organizations, small cap Kforce Inc has more than 60 offices located throughout the United States and one in the Philippines. Near the end of April, Kforce Inc reported a 0.8% sequential and a 14.9% revenue increase to $305.3 million along with a net income increase of 102% to $6.2 million. The Chairman/CEO commented:
"Our first quarter growth was broadly driven by the strong growth rates for our Flex staffing businesses in Tech, FA and HIM, which had year-over-year increases of 18.2%, 14.5% and 25.3%, respectively"
And also stated:
"We believe that professional staffing has entered a new age with growth being driven by clients increasingly utilizing a flexible staffing solution to mitigate employment and regulatory risk, as well as the ubiquitous nature of technology today across our clients' business platforms. Against a backdrop of tempered GDP growth, we continue to see a disproportionate share of job growth coming from the temporary staffing sector. The temporary penetration rate is now at 2.06%, surpassing the prior all time high of 2.03%. Knowledge workers are in high demand as the unemployment rate among college-degreed workers is currently 3.4%, about half of the overall U.S. rate of unemployment, and is substantially lower in several of the skill sets Kforce specializes in, particularly in technology."
On Wednesday, Kforce Inc rose 0.38% to $21.24 (KFRC has a 52 week trading range of $14.04 to $23.80 a share) for a market cap of $715.79 million plus the stock is up 1.7% since the start of the year, up 49.6% over the past year and up 136% over the past five years.
Staffing 360 Solutions Inc. Having a consolidation strategy that is well suited for the highly fragmented temporary staffing industry, small cap Staffing 360 Solutions intends to become a major international publicly-held staffing organization with diversified staffing services by engaging in a targeted accretive acquisition strategy. Staffing 360 Solutions has already developed a significant pipeline of acquisition targets in the IT, financial, accounting, healthcare and banking industries. Moreover, its executive chairman Brendan Flood spent seven years at Hudson Global Inc (NASDAQ: HSON) in various roles in Europe and the United States, culminating with him leading the company's IPO and listing of its common stock on the Nasdaq National Market in 2003. During 2004 and 2005 he was the CFO/COO for Hudson North America (returning the business to profitability after several loss-making years) while prior to the IPO, it should be noted that Hudson was part of what is now Monster Worldwide, Inc (NYSE: MWW). CEO Matt Briand also has 17 years of staffing industry experience from various recruitment, sales, management and executive roles. On Wednesday, Staffing 360 Solutions issued an updated forecast for the next three fiscal quarters is as follows: $24.1 million for the quarter ending May 31, 2014, $30.2 million for the quarter ending August 31, 2014, and $32.1 million for the quarter ending November 30, 2014. Staffing 360 Solutions has also recently completed the acquisition of PeopleSERVE, which provides IT professional and management consultants on a contract and direct hire basis to state and local government, multinational and regional businesses and entrepreneurial firms throughout the greater Boston area. On Wednesday, Staffing 360 Solutions fell 0.50% to $1.99 (STAF has a 52 week trading range of $0.55 to $2.10 a share) for a market cap of $60.98 million plus the stock is down 0.5% since the start of the year, up 20.6% over the past year and up 165.3% over the past five years.
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