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- The market punished On Assignment for a slight revenue miss and weaker full-year outlook.
- The growth story is still intact, but the upside might be less than I previously anticipated.
- Reward/risk favorable for the bulls even with a reduced price target.
- On Assignment should keep benefiting from the secular growth trends in the staffing industry and the company should continue to exploit its niche expertise.
- Recent acquisitions are complementary to the core business, while the divestment of Allied Healthcare is a good decision since the addressable market is small and the company could become dominant.
- Based on previous valuation trends, there is 20% to 30% upside in the next twelve months.
- Downside should be limited to a forward EV/EBITDA ratio of 10, and if the price gets there, it should be regarded as a strong buying opportunity.