Labor SMART (OTCBB: LTNC), an on-demand temporary labor firm based in Georgia, just posted record growth in revenues for the month of August. Revenues are running at a rate for 2013 that should easily be twice the market capitalization for Labor SMART. For investors, however, there is much more that makes Labor SMART a compelling buy.
The on-demand temporary labor industry represents almost $30 billion of the $100 billion dollar staffing industry that is growing and is one of the few industries that will prosper no matter what happens with the American economy in the future. While the US economy has been slowly recovering from The Great Recession, the full-time workforce has not. At the same time that participation in the workforce is at a low, the percentage of part-time workers in the United States is rising.
If economic growth in the United States remains tepid, there will be even greater need for staffing solutions and outsourcing services. This is especially compelling with Obamacare taking full force in 2014. Companies do not want to undertake the higher costs of full-time employees, so more are turning to Labor SMART and others for worker needs. As evidence of this, last month, in addition to the 175% increase in revenues from August 2012, Labor SMART added more than 100 new clients for the month, while showing an approximate 250% increase in their client base, so far in 2013.
Should the American economy start to grow more robust, companies will need even more workers from the demand labor sector. Due to greater competition from aboard, firms still do not want to staff up with full-time employees. Again, that is largely due to Obamacare. But there are other potential laws that businesses will choose to avoid by utilizing on-demand labor services.
Labor SMART is continuing to strategically position itself to prosper regardless which direction the American economy takes.
As part of Labor SMART's aggressive growth strategy, they recently acquired Qwik Staffing Solutions, which now allows them access into the lucrative labor market in Florida, which is currently experiencing a significant construction boom. Labor SMART has also expanded from 6 branches in 4 states to 15 branches in 9 states, so far in 2013, in their quest to establish a nation-wide presence. With a significant presence in the Southeast region of the U.S., Labor SMART now reaches as far west as Kansas City. Labor SMART also recently announced the opening of a Corporate Accounts Division in order to better serve large corporate clients with a multi-state presence.
Like any $100 billion industry, the temporary worker and staffing sector has its niche players. Robert Half is very strong in legal and accounting staffing. Paychex is the premier payroll and benefits company. For Labor SMART, it is in the sector of "blue collar" temporary personnel.
For these services, Labor SMART has a diverse client base ranging from small businesses to Fortune 100 corporations. It serves industries ranging from retail to hospitability to demolition and disaster relief. These workers are usually provided "at a moment's notice."
While it may seem that on-demand labor and staffing companies would do better with a weak economy, these companies have boomed as the American economy has recovered. This year, Paychex is up more than 27%. For 2013, TrueBlue Inc is higher by nearly 60% while recently hitting a new 52 week high. Over the last year, the stock price of Robert Half International has also jumped almost 50%.
The economic conditions have benefitted Labor SMART, too.
Labor SMART's revenues and growth are currently sitting at record levels. On a revenue basis, it is far more undervalued than others in its sector. While the price-to-sales ratio for Labor SMART is around .56, it is 6.14 for Paychex and even higher for other companies.
As hedge fund manager Andy Kessler noted in a recent article in The Wall Street Journal, eventually the share price will catch up to the earnings of a company. For Labor SMART, that will be obvious when the company turns the corner of profitability and the stock price surges!
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTCPK:LTNC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.