REDONDO BEACH, CA / ACCESSWIRE / October 22, 2015 / The temporary staffing industry is expected to grow 6% in 2015 to reach $115 billion and grow another 5% in 2016 to reach an all-time high of $121 billion, according to the U.S. Staffing Industry Forecast. While gross domestic product growth is the biggest driver for the industry, the low unemployment rate has helped improve average bill rates as companies looking to hire help must compete for fewer available candidates for jobs.
Despite a record 17 U.S. temporary staffing firms generating over $1 billion in revenue last year, the market is highly fragmented with the top five companies - including Robert Half (NYSE: RHI), On Assignment Inc. (NYSE: ASGN) and Korn/Ferry International (NYSE: KFY) – accounting for less than 20% of the industry's total revenue, according to Staffing Industry Analysts. These industry dynamics have opened the door for rapid growth through roll-up merger and acquisition strategies.
Staffing 360 Solutions Inc. (NASDAQ: STAF) has been pursuing this kind of strategy over the past several years, growing its revenue from $0 in fiscal 2013 to an annual run rate of $145 million today - a major accomplishment by anyone's measure. SECFilings.com correspondent Mike Elliott recently spoke with Staffing 360's President and CEO Matt Briand about the company's tremendous successes to date and its plans to drive shareholder value moving forward.
Compelling Top-Line Valuation
Staffing 360 Solutions successfully uplisted from the over-the-counter markets to NASDAQ in late-September, which opens the door to institutional investment and widens its appeal to retail investors that may begin comparing it to others in the space.
The important metric to watch in the space is the price-sales (P/S) ratio, which tells investors how much they are paying for each dollar in revenue. In aggregate, some of the top major competitors have an average P/S ratio of over 1.3, whereas the company's ratio is the lowest in the group at just 0.16. Staffing 360 Solutions could easily double or triple its market cap and still be undervalued compared to its peers based on its P/S ratio. The discount may have historically been due to its limited liquidity on the over-the-counter market, but its NASDAQ uplisting could mitigate these risks over time.
A second major consideration for investors is the company's growth rate. According to YCharts data, Staffing 360's quarterly year-over-year growth rate clocked in at 31% compared to negative growth rates for many of its larger competitors. This is primarily due to the fact that the company is smaller and nimbler, while its accretive acquisition strategy helps rapidly grow its top-line results as a percentage of its total revenue.
Improving Bottom-Line Results
Staffing 360 Solutions differs from its larger competitors in its lack of profitability on the bottom line, but this is a hallmark of many small and rapidly growing companies. For instance, Amazon.com Inc. (NASDAQ: AMZN) has become notorious for sacrificing profitability for growth since its inception. The idea is that these companies will achieve better market share and scale and could become profitable at any time by "flipping a switch" to reduce growth investments.
The company's management isn't simply "buying revenue", but rather, focusing on accretive acquisitions (not turnarounds) that they support through their "intelligent integration" methodology as economies of scale begin to kick-in. With sustainable margins, recurring revenue, quality customers, and reliable employees, these acquisitions have already led to a positive Adjusted EBITDA two quarters ahead of expectations, as well as its first quarter of positive cash flow from operating activities in fiscal Q1 2016, which was just announced last week.
The company's management team has also eliminated $8 million in liabilities since September of 2014 and closed on a $25 million accounts receivable facility and $3 million term loan in April of 2015. The company completed its most recent acquisition of Lighthouse in July, which adds $15 million of annualized revenue and creates additional engineering expertise for Staffing 360 Solutions.
Looking Ahead
Staffing 360 Solutions represents an attractive play in the growing staffing industry. With a low P/S multiple creating room for upside in its valuation, investors can acquire the stock at a discount as management continues to deliver on its promises as it gets closer to reaching its publicly stated $300 million goal. The company's $145 million run rate and NASDAQ uplisting make it worth an investor's consideration as a high growth opportunity in the highly fragmented staffing industry.
For more information, visit the company's website at www.staffing360solutions.com.
Disclaimer:
Except for the historical information presented herein, matters discussed in this release contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC may be compensated for its services in the form of cash-based compensation or equity securities in the companies it writes about, or a combination of the two. For full disclosure please visit: http://secfilings.com/Disclaimer.aspx.
SOURCE: Emerging Growth LLC
