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General Investing

On Assignment (ASGN) Doubles IT Staffing to Profit from Secular Changes

January 29, 2013

On Assignment (ASGN) doubled the percentage of its its IT staffing with the acquisition of private firm Apex Systems, going from 45% to 75% of its offerings exposed to this growing vertical of the staffing market on a pro forma basis, says Jeffrey M. Silber, Managing Director at BMO Capital Markets Corp.

“I mentioned IT staffing being the hottest vertical; they are certainly making a bet that that’s going to continue. The stock has done extremely well. In 2011, it was one of the best performing staffing stocks, if not the best performing staffing stock, up about 37%. And in 2012 year to date, the stock is up another 70% or so — one of the better performing staffing stocks this year,” Silber said.

Silber says the earnings growth has more than kept up with ASGN‘s growth, and that the stock is trading below it peer group’s earnings multiple, and he expects upside from the stock. “We think not only will you have positive earnings estimate revisions going forward, but you will see some multiple expansion as well, so that’s a stock we think can continue to work,” Silber said.

ASGN‘s President and CEO, Peter T. Dameris, recently discussed the Apex Acquisition and the company’s future growth prospects. The company grew about 18% in 2012, and he expects secular trends to continue driving the company’s growth.

“For our business, it is actually the perfect blend of a supply/demand imbalance and secular changes. The oddity is that the staffing industry for public investors typically has been a cyclical play — we’re the first to recover coming out of a recession and the first to go into a recession, and the business model operates very well when you have GDP growth. Well, today we’ve had four years of outstanding growth without any help from GDP growth, because GDP growth right now is pretty anemic at around 1.5%,” Dameris said.


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