Seeking Alpha
Profile| Send Message|
( followers)  
I'll tell you why I like TALX Corporation (TALX) and it starts with 55% annual growth from March '02 to March '06. It continues with the fact that they are doing HR business process outsourcing (or "BPO" for you buzzword afficianados), and finishes with increasing operating margins.

Ok, so it doesn't actually finish with the operating margins; TALX also cash flows nicely from operations and a lot of the risk that was in the stock after it ran up at the beginning of the year was wiped out with our recent stock market splatter. Right now TALX is trading at $26.60. With calendar '06 estimates around $1.03, my back-of-the-envelope says that they should be able to trade in the $36 range ($1.03 EPS, w/ 28% growth rate w/ 1.25x PEG). They got there in January, so I don't think it's inconcievable for them to get there again. The market for outsourced business processes, particularly on the HR side, is growing fast and with TALX already handling 75% of the Fortune 500, they should see some of the future growth come their way.

This is not totally without risk - consensus estimates for the June '06 quarter are the high end of the company's stated range, and if they don't hit this the stock will likely take a tumble. Also, it's hard to say what could happen in the current market environment, even without an earnings miss the stock could still see continued pressure. They're in a good industry, though, with growing margins and a 35% gap from what I see full value to be, so I think this could be one to start a position in.

Bottom Line: BUY

TALX 1-yr Chart

Source: The Long Case for TALX Corporation (TALX)