BG Staffing Stock: A “Trump” Stock That Looks to Break Higher
BG Staffing Is a Jobs Play with More Room to Run
Since the beginning of 2017 and roughly the start of President Donald Trump’s term in office, the country has created about 3.2 million new jobs, driving the unemployment rate down to an 18-year low of 3.8%.
The tax reform may have helped, and small job services companies like BG Staffing Inc (NYSEAMERICAN:BGSF) are benefiting from the stronger job market.
May witnessed the 92nd straight month of job creation in the United States, posting an impressive 233,000 new jobs. For the first time in a while, there are more available jobs than job seekers.
BG Staffing has been on an aggressive run of acquiring other job services companies—nine of them since 2010.
The company serves numerous business segments, including information technology; light industrial; finance and accounting; administrative and clerical; and multifamily.
A look at the BGSF stock price chart shows a nice run this year, up 34%, including a 21% gain over the past three months as the job market picked up steam.
BGSF stock is trading above its trend line and 50-day moving average. The stock could see a bit of weakness down to $19.00–$20.00, however, prior to breaking out.
Chart courtesy of StockCharts.com
My Bull Case for BGSF Stock
The steady addition of companies acquired by BGSF helped drive revenues higher in four straight years, from $151.7 million in 2013 to $272.6 million in 2017.
The positive revenue trend for BG Staffing is estimated to continue at seven percent to $291.6 million this year, followed by 9.4% to $318.9 million in 2019. (Source: “BG Staffing, Inc. (BGSF),” Yahoo! Finance, last accessed June 21, 2018.)
My bull thesis is driven by the strong job market that should help drive BG Staffing stock higher.
The company has produced profits in four of the past five years, but has reported lower earnings after recording $1.48 diluted earnings per share (EPS) in 2013.
| Year | Diluted Earnings Per Share |
| 2013 |
$1.48 |
|
2014 |
-$0.08 |
| 2015 |
$0.73 |
|
2016 |
$0.82 |
| 2017 |
$0.65 |
There is some optimism as BG Staffing is expected to double its earnings to $1.39 per diluted share this year and $1.62 per diluted share in 2019.
Another big plus for the company is the positive free cash flow that grew in 2014, 2015, and 2017.
| Year | Free Cash Flow (Millions) | Growth |
| 2013 |
$2.1 |
|
|
2014 |
$5.4 | 159.7% |
| 2015 | $11.2 |
109.9% |
|
2016 |
$8.6 | -23.5% |
| 2017 | $16.9 |
96.9% |
Analyst Take
The catalyst for a higher stock price for BG Staffing is the rising revenues, earnings, and free cash flow.
The multiple is expected to improve to 13.1 times its 2019 EPS versus 27.7 times trailing EPS. The price/earnings to growth (PEG) ratio of 0.77 points to an undervalued situation in which BGSF stock is trading at below its estimated five-year compound annual growth rate (CAGR) for earnings.
