As the job market heats up, so do expectations for On Assignment Inc. The question is: can it meet them? The Calabasas staffing company, which specializes in placing information technology and life-science workers permanently and temporarily, has been on a growth spurt of late. It ranked No. 3 on Fortune magazine’s list of fastest-growing companies, published Aug. 29. The ranking took into account revenue, earnings per share and return on investment over three years. In the past year alone On Assignment’s revenue has grown 43 percent to $1.7 billion. But despite that recognition, the company’s stock hasn’t recovered from a setback in late July when it reported second-quarter financials. On Assignment announced non-GAAP adjusted earnings of $30 million (56 cents a share), beating analyst expectations by 20 cents. However, revenue amounted to only $469 million – up nearly 15 percent compared to the same quarter a year ago, but about $2 million below the consensus estimate. Based on that shortfall, and management’s lower guidance for the rest of the year, the stock lost 22 percent the following day, July 31. Dan Dolev, an analyst at Jefferies LLC in New York, believes the market reaction was exaggerated. “The company is best positioned to benefit from IT staffing trends and profitability is improving,” he said. In a report on Aug. 15, Dolev said that IT hiring growth slowed in the second quarter, but the sector still grew 5.5 percent. He ranked On Assignment as the most likely company to benefit when hiring picks up. The recent lower valuation of the stock “remains compelling” and Dolev has a price target of $42. Shares closed Oct. 1 at $26.39. On Assignment’s growth model depends on acquisitions. In 2012, it bought Apex Systems, an IT staffing firm in Richmond, Va. for $300 million. Apex now accounts for 64 percent of revenues, according to the latest quarterly figures. Last year it bought Cybercoders Inc., an agency for software programmers in Irvine, for $105 million. Mike Bourdon, co-founder of tech recruiting firm Career Strategies in Woodland Hills, said the IT staffing industry had a banner year in 2013, so it’s not surprising On Assignment is doing well. At the same time, it’s hard to sustain massive growth in staffing organically, which explains On Assignment’s penchant for buying competitors. “They have a sharp eye for acquisitions,” he noted. “With Cybercoders they look good because of growth in IT staffing. The time was right for them to acquire a company like that.” On Assignment didn’t make an executive available to comment because of scheduling conflicts, but in a conference call on July 31 Chief Executive Peter Dameris attributed the quarterly revenue slip to a lower-than-expected headcount at one division. He concluded that all signs pointed to broad growth for the future and possible additional acquisitions. “We continue to see steady demand in all disciplines and expect consultant counts will continue to increase,” Dameris said. “Our permanent placement business, high volume IT, and scientific staffing businesses had the strongest momentum and appear poised to have another strong growth year.”
