March 26, 1999
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StaffMark Inc. Up 13%; Company Cites Low Valuation
Dow Jones Newswires
NEW YORK -- StaffMark Inc. (STAF) shares continued to bounce back from a 52-week low touched earlier this week, with the company citing the stock's low valuation.
Agreeing the stock was undervalued, analysts also suggested that shares of the Fayetteville, Ark., staffing services provider were helped by speculation that it is a takeover target, in light of Interim Services Inc.'s (IS) announcement Thursday that it agreed to acquire competing staffing company Norell Corp. (NRL).
StaffMark investor relations officer Randle C. Reece declined to comment on takeover speculation.
"What we're going to see in the future is a lot more of these mergers with public staffing companies," said A.G. Edwards analyst Laura Browder. She added that some investors may view StaffMark as a potential target partly due to its low valuation.
StaffMark shares recently traded up 1 1/16, or 17%, at 7 7/16, on volume of 1.2 million. Average daily volume is 485,000. The shares fell to a 52-week low of 5 3/4 Wednesday, then rose 7% Thursday.
Browder said StaffMark was trading at just above 4 times her 1999 earnings estimate of $1.63 a share.
Gerard Klauer Mattison analyst Jeffrey Silber said most staffing companies were trading around 9.5 times forward year earnings. He said StaffMark's shares have been well oversold in recent months.
StaffMark said March 2 it expects earnings for the first quarter ending March 31 to be 10 to 13 cents lower than analysts' consensus estimate 35 cents a share, citing a decline in demand from its finance, banking and legal clients and lower growth from its information technology staffing business.
"All we know is we feel our stock was way oversold and that if people compare the valuation of company now with the valuation of recent merger-and-acquisition transactions, the comparison is favorable," StaffMark's Reece said.
Reece cited the Interim Services-Norell deal and a recent proposal by an institutional shareholder of Staff Leasing Inc. (STFF) to acquire the entire company. Reece said StaffMark was trading around 3 times its pro forma EBITDA while the per-share purchase price in the other deals represented about 7 to 8.5 times EBITDA of the acquisition targets.
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