Yesterday, GeoBargain MHH reported Q3 2014 results and we stated that in our 9/24/2014 email we mentioned that we have sold most of our position as the company works through recruitment challenges it faced in Q2 2014.  We intended to request a follow up call with management to try and obtain a better grip on the near term growth prospects since analyst estimates do not appear to exist anymore.  A primary concern to our team was that it had been unclear that management was still behind its long standing goal growing revenues 1.5X the IT Staffing industry average.  While we have yet to conduct this call, the Q3 2014 conference call was extremely bullish and provided many answers to our questions.  We encourage investors to read the full transcript here.

Revisiting Long Position in Mastech Holdings (MHH)

Still long MHH ($9.80).  We will begin to slowly rebuild a small position in shares of MHH.

Some of our indecisiveness over GeoBargain MHH’s near-term growth prospects have subsided due to commentary on its  Q3 2014 conference call replay, which we listened to yesterday after the close.  It looks like MHH is in  position to resume growth.   Even though MHH is up 63% since we coded the stock as a GeoBargain on 12/19/2012 at a price of $7.50, it has pulled back nearly 50% over the past 11 months from its high of $19.98. At a trailing P/E of 12 we think management will continue to buy back stock and consider other tools to maximize shareholder value, now that growth appears to be back on track.  Please note that, it’s possible that a bullish position in MHH will require some investor patience for two quarters while management proves it can begin to deliver growth again.

Some highlights from the conference call:

• Goal of growing revenue at 1.5x the IT Staffing industry average is back on the table.
• It seems the Q2 recruitment challenges are behind them.  Assignment rate is back on track.
• Aggressively ramped up recruitment organization and expanded the sales team which the company believes will begin to yield positive results as early as Q4 2014 but more notably throughout 2015.
• Set the stage for improved gross margins as margins on new assignments have strengthened.
• Continues to demonstrate shareholder friendly initiatives which was one of the initial catalyst that drew us to MHH (two special dividends and one stock split).  As mentioned in the press release, the company repurchased 32,000 shares at an average price of $12 per share during Q3 2014.  Our read of management’s statements on the conference call lead us to believe that they will continue to buy back stock and consider other tools to maximize shareholder value.