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On January 3, 2013, Zacks Investment Research upgraded Barrett Business Services Inc. (BBSI - Snapshot Report) to a Zacks #1 Rank (Strong Buy).

With a solid return of 99.8% over the past year and positive estimate revisions, this provider of business management solutions is an attractive investment opportunity.

Why the Upgrade?

An upbeat third quarter 2012 and increase in dividend per share have contributed to the upgrade.

After delivering solid third quarter results, Barrett announced an 18.0% increase in its dividend (from 11 cents per share to 13 cents). The increase was the reflection of the company’s strength in earnings and cash flow generation.

Barrett reported third quarter earnings per share of 81 cents, ahead of the Zacks Consensus Estimate of 71 cents and up 50% from the year-ago quarter.

Revenues grew 30% year over year to $111.1 million, driven by strong growth in Professional Employer Organization (PEO) client count and strong same-store sales growth. The company’s professional employer services and staffing services business segments reported revenue growth of 40.5% and 4.6%, respectively.

Management acknowledged the solid client base and asserted that client retention was strong.

Each of the 2 estimates for 2012 and 2013 were raised over the last 60 days.

Despite the positive estimate revisions, the Zacks Consensus Estimate for 2012 remained unchanged at $1.67 with the Zacks Consensus Estimate for 2013 moving up 4 cents (1.9%) to $2.17.

Barrett has the potential to post a positive earnings surprise in the upcoming quarter. For the past four quarters, the company has posted an average surprise of 10.5%.

Other Stocks to Consider:

Business management solutions providers Broadridge Financial Solutions Inc. (BR - Snapshot Report) and StarTek Inc. (SRT - Snapshot Report) also have a Zacks #1 Rank (Strong Buy).

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