A few weeks ago I discussed SPAR Group (SGRP), a diversified international merchandising and marketing services company, in "SPAR Group: A Value and A Growth Stock". Thursday, the company announced 2012 third quarter and nine month earnings and not only furthered my value argument, but also proved the growth story to be true.
2012 third quarter revenue increased 50% YOY to $26.4 million and net income increased 134% to $936,000 or $0.03 per diluted share. 2012 nine month revenue totaled $71.8 million, an increase of 44%, gross profit totaled $19 million, an increase of 25% and net income totaled $1.6 million, an increase of 59%, or diluted EPS of $0.7. Additionally, book value increased to $11.6 million as compared to $9.3 million as of December 31, 2011. Through disciplined financial controls and increased cash flow they achieved these results while increasing their cash position to $1.9 million and decreasing borrowings by $3 million.
The company provided guidance earlier in 2012 of $90 million for 2012. Based on achieving $71.8 million dollars in revenue for the first nine months I am inclined to believe that the company will far surpass this guidance. During the fourth quarter of 2011 the company achieved revenue of $23.6 million. Assuming that the company achieves 0% growth during the current 4th quarter, revenue for 2012 will equal $95.4 million. Now let's assume a growth rate of 20%, which is fair based on the 50% growth just announced for the 2012 third quarter then revenue for the 2012 fourth quarter would be $28.3 million implying revenue for 2012 of $100 million.
Generating revenue of over $100 million for the 2012 fiscal year as compared to the company's current revenue guidance of $90 is a catalyst for this stock and should be considered when evaluating SPAR Group's investment opportunity.
During the third quarter management announced $20 million worth of contracts and increased operations in Romania and South Africa. You can reference here and here. While most of this revenue will be generated in 2013 it further proves the growth trajectory the company is currently on.
The company is achieving this financial results by providing superior services compared to their competitors to Fortune 500 companies such as Wal-Mart (WMT), Target Corp. (TGT) P&G (PG), and Staples (SPLS).