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Buy This Staffing Stock as Jobs Market Continues to Improve

TBI looks strong -- but beware of its sizzling peer

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Sell: Corporate Resource Services

On the sell side, I’m going to go with the hottest stock of the staffing group: Corporate Resource Services (CRRS), which is up 966% since Jan. 1.

Investors have been buying in anticipation of earnings catching up to revenue growth. In the last three fiscal years, CRRS has grown revenue from $64 million to $640 million via acquisitions. As that revenue base grows, management expects to leverage the company’s size to reduce both its fixed and variable costs, which would in turn drive up its profits.

Up until this year, the company hadn’t seen a whole lot in the way of profits. Corporate Resource Services’ operating profit in the second quarter was $3.8 million on $199 million in revenue, for example. A year earlier it lost $716,000 on $154 million in revenue. It expects EBITDA for the entire fiscal 2013 to be as high as $24 million on revenues of $855 million — an EBITDA margin of 2.8%.

True Blue’s are approximately double.

To be clear, there’s nothing that I can see that suggests this is anything but a business on the rise. However, its enterprise value is 28 times EBITDA — almost three times True Blue’s without nearly as consistent an operations track record. While this company could be the next True Blue, it’s come too far too fast.

Trading under a dollar for most of the past five years, CRRS only came to life in April when it announced it was branding all of its subsidiaries under the Corporate Resource Services banner. Two profitable quarters later you arrive at a stock price knocking on five bucks.

Those who bought earlier this year should be very pleased. But if CRRS doesn’t hit its fiscal 2013 targets, especially with regard to profits, the stock will be back near $1 before you know it. The stock’s next 1,000% gain won’t come nearly as easily.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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