Shares of On Assignment Inc. reached a 52-week high of $85.15 in mid-March, a 77 percent increase over the previous year. The peak came after the Calabasas staffing company reported better-than-expected earnings of $169 million for the fourth quarter of last year, up 9.4 percent year-over-year. Tobey Sommer, an analyst at SunTrust Robinson who covers the company, said increased demand for IT contractors, especially at financial services firms, has driven On Assignment’s recent growth. “We’re seeing a greater adoption of the company’s business model,” he said. Instead of hiring full-time employees, many businesses are turning to staffing agencies because it gives them more flexibility on projects and lowers overall costs. Employers don’t have to pay for employee benefits, and can renew contracts if they choose. The U.S. staffing market grew 3 percent in 2017, according to a report by Staffing Industry Analysts. Sommer points to the recent H-1B Visa reform, which makes it more difficult to hire foreign workers, as well as the overall high-demand for labor as contributing factors to industrywide growth. This has not only increased hourly wages for contractors but driven up the price for the separate bill rates that staffing agencies charge clients. Looking ahead, Sommer expects On Assignment to sustain its upward trajectory because of a contract with the Department of Defense to update health care records, which will ramp up this summer. “Expect it to be a boost in the second half of the year,” he said. He currently gives the company a “buy” rating. Another promising indicator for growth is the company’s recent $775 million acquisition of federal technology and engineering contractor ECS Federal LLC. Sommer expects to see a high single-digit increase in government spending in these sectors over the year. “There is reason to think revenues for (ECS Federal) will be even higher than On Assignment’s,” he added. On Assignment has eight separate agencies that specialize in placing freelancers in the technology, health care, creative and life science sectors. It has international offices in Canada, the United Kingdom and in Europe. The company was founded in 1985 and went public in 1992. On Assignment’s stock price has taken a hit in recent weeks, in line with the overall stock market volatility. As of March 27, shares were down 6 percent from their 52-week high to $80.05.
