On Assingment (ASGN): Zacks Rank Buy
On Assignment (ASGN) is a Zacks #1 Rank (Strong Buy) and has seven consecutive positive earnings surprises and higher earnings estimates.
Company Description
On Assignment, Inc., through its first operating division, Lab Support, is a leading nationwide provider of temporary scientific professionals to laboratories in the biotechnology, pharmaceutical, food and beverage, chemical, and environmental industries. The company's strategy is to serve the needs of targeted industries for quality assignments of temporary professionals. On Assignment, Inc. was founded in 1985 and is headquartered in Calabasas, California.
Seven for Seven Positive Earnings Surprises
ASGN has reported a positive earnings surprise in each of its last seven quarters. Starting in the December 2010 quarter when the company beat the Zacks Consensus Estimate by $0.01, there were three straight increases in the size of the beat. One penny may not seem like much, but its just what aggressive growth investors are looking for when they screen for accelerating earnings momentum.
Over the last four earnings reports, the company has beat the Zacks Consensus Estimate by an average of $0.03 for about 26%. The two recent beats are great signals for aggressive growth investors that are looking for earnings momentum. September 2011 saw a beat of 23.5% and the company continued the strength that started back in December 2010 with a 25% in the December 2011 quarter. That is positive earnings momentum.
HSFT Recently Reported Earnings
On February 14, 2012 the company reported revenue of $162 million $4 million higher than estimates and an increase of 34% from the $121 million posted in the year ago period. Earnings per share came in at $0.20 up from $0.08 posted a year ago and $0.04 ahead of the Zacks Consensus Estimate. The stock traded higher by 13% following the earnings release.
Earnings Estimates Bumped Up
Following the most recent earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $0.71 in January 2012 to the current level of $0.80.
Recent Acquisition
On March 20, 2012 the company announced the acquisition of Apex Systems, an IT staffing firm. In 2011, Apex Systems had approximately $700 million in revenue and adjusted EBITDA of approximately $65 million. On Assignment will acquire all of Apex Systems' equity and retire all of its debt, for a total of $600 million. The purchase price is comprised of $383 million in cash, and newly-issued stock valued at $217 million. After the announcement, the stock moved higher by 30% intraday and later consolidated a little lower..
Valuations
ASGN trades at a higher multiple than the industry average for both trailing and forward PE. At 22x forward earnings, the implied premium to the industry average of 13.6x is far lower than what is exhibited in the trailing twelve months PE. Price to book of 2.6x shows ASGN trading at a discount to the industry average of 2.8x. An even bigger discount can be found in the price to sales multiple of ASGN, with the industry average of 2.23x just a little more than double the 1.11x multiple for the company.
The Chart
The price and consensus chart for ASGN shows how the analysts have been raising expectations over the last year. The stock has closely tracked the estimates and is generally undervalued when the stock price line is below the estimate lines. The recent acquisition should help increase estimates, which will in turn move the estimate line higher. This will make ASGN more attractive to aggressive growth investors. ASGN is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
ON ASSIGNMENT (ASGN): Free Stock Analysis Report
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