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Barrett Business Services

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Barrett Business Services Inc. (BBSI - Free Report) has been beating quarterly earnings expectations for around three years now, most recently topping by 14.1% in its third quarter. Shares for this provider of business management solutions have grown 62.5% year-to-date. Furthermore, this Zacks #1 Rank (Strong Buy) is expected to grow earnings by 35% over the next 5 years, which is significantly higher than the 17.8% for the industry.

Solid Q3 Results

On October 23, Barrett Business Services 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 the 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. The company attributed the solid results in the quarter to BBSI's maturing brand and strong referral channels, which helped drive new clients along with its ability to retain them.

Looking into the fourth quarter, the company projects gross revenues between $585 million and $590 million, while earnings per share are expected at 75 cents to 78 cents.

Earnings Estimates Move Higher

The Zacks Consensus Estimate for 2012 is up 12.1% to $1.67 per share in the past 60 days, as both estimates were revised upward. This represents a year-over-year increase of 88.2%.

The Zacks Consensus Estimate for 2013 grew 17.0% to $2.13 per share over the same time, as, again, both estimates were raised. This suggests a year-over-year increase of 27.2%.

Valuation is Attractive

Currently, Barrett Business Services is trading at a discount to its peers. It currently trades at a forward P/E of 20.4x, reflecting a 1.0% discount to the peer group average of 20.6x. Also, on a price-to-sales basis, shares trade at 0.60x, implying a slight discount from the peer group average of 0.64x.

Moreover, the company’s trailing 12-month ROE of 20.0%, against 6.8% for the peer group, suggests that it actively and efficiently reinvests its earnings compared to the peer group. In addition, these compelling fundamentals are well supported by the company’s long-term estimated earnings growth rate of 35.0% versus 17.8% for the peer group.

Shares have been advancing since the start of calendar year 2012, gaining a robust 62.5% year-to-date.

Barrett Business Services has consistently traded above its 200-day moving average since the beginning of this calendar year, and has also remained above its 50-day moving average since June 14. Moreover, the company has outperformed the S&P 500 Index since July 25. Volume is fairly strong, averaging roughly 41K daily.

Barrett Business Services has roughly 47 years of experience in providing business management solutions. The company offers staffing and professional employer organization services, which help employers to manage employment-related issues efficiently, while reducing operational costs to a great extent. The host of service offerings includes payroll processing, employee benefits and administration, workers’ compensation coverage, effective risk management and workplace safety programs, and human resource administration. The company has a market cap of $240 million.

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