Impressive fiscal third quarter 2012 (ended Sep 30, 2012)
results, which surpassed the Zacks Consensus Estimate, as well as
high earnings estimates helped
Barrett Business Services Inc
) achieve a Zacks #1 Rank (Strong Buy).
Since the release of its third-quarter results on Oct 23,
shares of this business management solutions provider have surged
about 27.9%. Moreover, considering its robust growth
(year-to-date return of approximately 74.0%) and the history of
beating quarterly earnings estimates (including an average beat
of 10.5% over the trailing four quarters), it can be stated that
this stock offers an attractive investment opportunity.
The Rank Driver
An impressive record of beating the quarterly earnings
expectations, a positive fiscal 2012 outlook, and a decent
dividend yield, are the major rank drivers for this stock.
With respect to earnings surprise, Barrett Business Services
has been beating the quarterly earnings expectations for the last
three years. In the third quarter of fiscal 2012 it topped the
estimate by 14.1%.
On Oct 23, 2012, Barrett Business Services reported
third-quarter earnings per share of 81 cents, ahead of the Zacks
Consensus Estimate of 71 cents. Moreover, it surged 50% from the
Revenues soared 30% year over year to $111.1 million, driven
by strong growth in the Professional Employer Organization (PEO)
client count and strong same-store sales growth. The company's
professional employer services and staffing services business
segments reported revenue growth of 40.5% and 4.6%,
Management acknowledged the solid client base and asserted
that client retention was strong. The company attributed the
solid results in the quarter to Barrett Business Services'
maturing brand and strong referral channels, which helped drive
new clients along with its ability to retain them.
In the fourth quarter, the company projects gross revenues
between $585 million and $590 million, with earnings per share in
the range of 75 - 78 cents.
Barrett Business Services rewards its shareholders through
regular and increased quarterly dividends. In November, the
company announced its fourth-quarter 2012 dividend of 13 cents
per share, payable today (Dec 14, 2012) to shareholders of record
as of Nov 30, 2012, reflecting an increase of nearly 18% from the
dividend paid in the third quarter of 2012. This yields a solid
1.45%, while the company has a payout ratio of 39%. We believe
that the company's continuous dividend payment and increments
reflect its earnings growth capacity and cash flow
Currently, Barrett Business Services trades at a forward P/E
of 23.28x, slightly above the peer group average of 21.77x.
Again, its price-to-book and price-to-sales ratios of 5.23 and
0.68 are at a premium to the peer group average of 2.55 and 0.67,
However, the company's trailing 12-month ROE of 20.0%, against
6.8% for the peer group, suggests that it actively and
efficiently reinvests its earnings compared to the peer group. In
addition, these compelling fundamentals are well supported by the
company's long-term estimated earnings growth rate of 35.0%
compared with 17.8% of the peer group.
The company's shares have been advancing since the beginning
of calendar year 2012, gaining a robust 74% year-to-date.
About The Company
Barrett Business Services has roughly 47 years of experience
in providing business management solutions. The company offers
staffing and professional employer organization services, which
help employers to manage employment-related issues efficiently
while reducing operational costs to a great extent. The host of
service offerings includes payroll processing, employee benefits
and administration, workers' compensation coverage, effective
risk management and workplace safety programs, and human resource
administration. The company has a market cap of approximately
Barrett Business Services, which competes with
), currently holds Zacks #1Rank, implying a short-term Strong Buy
rating. We are also maintaining a long-term 'Outperform'
recommendation on the stock.
BARRETT BUS SVS (BBSI): Free Stock Analysis
INSPERITY INC (NSP): Free Stock Analysis
To read this article on Zacks.com click here.