GeoInvesting will look to build a small to medium-sized positions in in two staffing companies prior to the 2015 Q3 results, reports slated for the end of October.  We are optimistic that the investment returns will be worth the buys.

Both companies appear to be on track to achieve a 12 month forward EPS run rate of at least $1.00, resulting in forward P/E’s of 7.8 and 13.3, respectively.  We can see both companies trading at north of $15 if our run rate analysis is correct, resulting in meaningful investment returns.

We plan to interview management of one of the companies shortly to:

  • learn more about growth catalysts
  • address seasonality issues
  • determine  if the the level of Sales EPS levels achieved in Q2 2015 are sustainable.

Our Premium members have received detailed updates on these companies and we will continue to keep them abreast of our moves.

GeoInvesting will look to build a small to medium-sized positions in Mastech Holdings Inc (AMEX:MHH) and BG Staffing Inc. (AMEX:BGSF) prior to the 2015 Q3 results, reports slated for the end of October.  We are optimistic that the investment returns will be worth the buys.

On June 24, 2015 we stated we were once again taking a closer look at IT Staffing company MHH due to its recent acquisition of Hudson Global, mentioning that we would perform further due diligence.  Our initial analysis shows that the Hudson acquisition could add roughly $7.5 million in revenues and $0.07 in non-GAAP EPS per quarter, setting the stage for MHH to report at least 4 strong quarters of sales and earnings growth.

The major wildcard in the story is the health of MHH’s legacy business, which has been tempered with growth challenges since  2014 Q2 revolving around recruitment and project management issues.  It appears the company may have addressed the challenges that were affecting its organic growth.

Management’s commentary in its recent Q2 2015 call indicated that the company’s growth is set to accelerate in the second half of 2015.   Resolving the issues with the legacy business combined with the acquisition of a company that carries higher margins than the legacy business could give MHH an advantage on two fronts, especially if management’s previous guidance to grow its sales at 1.5x the industry average is back on the table.

Another IT Staffing Company On Watch – BG Staffing

We are nibbling at shares of BG Staffing, another IT Staffing company in our cross-hairs which was brought to our attention by Taglich Brothers, whose past recommendations have panned out for us on a number of occasions.   We believe BGSF presents a unique opportunity, similar to one in Educational Development Corp (NASDAQ:EDUC), in that it is paying a high dividend yield (~7%) and is in the midst of a strong growth phase.  BGSF is growing organically and through acquisitions.  Its recent acquisition of Vision Technology Services will add roughly $30 million in sales and $3.9 million in EBITDA.  Based on 2015 Q2 numbers, BGSF’s EBITDA run rate was $4.1 million.  The company reported strong Q2 numbers on August 3, 2015 and that was prior to the acquisition.

  • Sales of $49.8 million vs $42.8 million in the prior year
  • EPS of $0.20 vs $0.04 in the prior year

We plan to interview management shortly to:

  • learn more about growth catalysts
  • address seasonality issues
  • determine  if the the level of Sales EPS levels achieved in Q2 2015 are sustainable.

Both companies appear to be on track to achieve a 12 month forward EPS run rate of at least $1.00, resulting in forward P/E’s of 7.8 for MHH and 13.3 for BGSF.  We can see both companies trading at north of $15 if our run rate analysis is correct, resulting in meaningful investment returns.