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Bear of the Day

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On Assignment (ASGN - Snapshot Report) is feeling the impact of a bad jobs number coming after an earnings miss. Today, it’s the this Zacks Rank #5 (Strong Sell) stock is the Bear of the Day.

Earnings Report History

Over the last several quarters, ASGN has been a very reliable company. They beat the Zacks Consensus Estimate in five of the last six quarters. The most recent quarter will be discussed below, but let's just say that the stock dropped 11.5% in the session following the report.

Estimates Move Lower

After estimates had held still for some time at $1.23, they moved lower after the earnings miss. The 2013 Zacks Consensus Estimate moved to $1.06. At the same time, estimates for 2014 have also come down from $1.43 to $1.31.

Company Description

On Assignment is a staffing company for higher end jobs. The company recently noted that it was selling its nursing business line, and that was the major reason for estimates turning lower.

ASGN Misses Estimates In Most Recent Quarter

In the most recent quarter the company posted a negative earnings surprise. ASGN reported $0.21 when the Zacks Consensus Estimate was calling for $0.28. That $0.07 miss translates into a 25% negative earnings surprise.

Valuation

While the stock traded lower following the poor report, investors were more or less willing to look the other way. The valuation is mostly back where it was before the report, with a slight premium being given to both PE multiples. The forward PE for ASGN is 22.7x compared to the 17.8x industry average. The other multiples have ASGN trading at a discount to the industry average. The price to book is 2.4x while the industry average is 2.8x and the price to sales multiple of 1x is below the 2x industry average.

The Chart

The price and consensus chart for ASGN shows how the recent miss and sale of a business line can impact the earnings. The impact of the recent weaker jobs report cannot really be seen on this chart, but we do see where the valuation might be getting somewhat high. Generally speaking, when the stock price is above the earnings estimate lines, then the stock is likely overvalued.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Follow The Money Trader a trading service that tracks institutional money flows and looks for great stock picks from that data.

Follow Brian Bolan on twitter at @BBolan1

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