Human Resources Sector Promising

I don’t know much about the human resources business. All I know is that it’s big.

Many employers out there aren’t good at hiring and firing people so they have someone else to do it for them. Many employers want flexible employees so that they can add or subtract workers depending on business conditions. This is why there are a lot of temporary employment agencies out there.

There’s a great small-cap company out there that operates in the human resource business. This company is worth putting on your radar screen.

Kenexa Corporation (NASDAQ/KNXA) is a company that’s in the business of helping employers recruit and retain employees. In effect, Kenexa is a technology company.

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Headquartered in Wayne, PA, the company sells software and proprietary services that helps with applicant tracking, employment process outsourcing, phone screening, skills and behavioral assessments, interviewing, feedback surveys, and other analytics.

This sounds simple enough, but the company must really be satisfying its clients because its financial growth has been impressive.

For the first quarter of 2006, Kenexa reported revenues of $23.0 million, representing an increase of a whopping 61% over revenues of $14.3 million generated in the first quarter of 2005.

Net income was $3.3 million or $0.17 per diluted share for the quarter, as compared to a net loss of $9.7 million, or a loss of ($1.88) per basic share, for the same period of 2005.

The company finished the quarter with $79.5 million in cash, with virtually no debt.

Not surprisingly, the stock market was somewhat aware of the company’s success, and the stock moved from $10 per share to over $38 per share since last September. The stock has pulled back recently, in anticipation of the company’s second quarter financial report which was due on August 1, 2006.

If I was an investor looking for new opportunities in this market right now, I’d put this company on my radar screen.