News Details – Smallcapnetwork
Staffing 360 Solutions Grows the Top Line 24%, and That's Not Even the Best Part
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February 2, 2024

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PDT

Happy hump-day, one and all. Well, Wednesday wasn't actually a happy day for most investors. The S&P 500 ended up losing close to 2% of its value, but worse than that the market broke under more of the key floors that have been struggling to keep it propped up for the past few weeks. I fear the bulls are finally in over their heads. The good news is, we've still got some bullishness to talk about.... bullishness made all the more impressive by the fact that it happened against the marketwide tide. Remember Staffing 360 Solutions (STAF)? You should. We covered the company for the better part of 2014, and put this up-and-coming name back on your radar in September of last year. We haven't been disappointed. Today's gain following news - and the news itself - once again suggests this is a right time/right place opportunity the market is willing to embrace at the drop of the hat, and for good reason. As a quick refresher if it's slipped your mind, Staffing 360 Solutions is a staffing agency that specializes in IT staffing, and focuses on the cybersecurity aspect of IT. There's no doubt there's a tremendous opportunity in this space. As James Brumley explained today, by 2019 the world is going to need 6 million cybersecurity specialists, but on our current trajectory we'll only have 4.5 million of them to fill those slots. That means anybody who can do this sort of work - or supply people to do this kind of work - can charge a serious premium and is assured strong demand. Staffing 360 Solutions is going to be one of those suppliers. Capitalizing on the current and impending explosion of growth in the cybersecurity space, Staffing 360 Solutions is of course producing some organic growth. In order to ensure it's out in front of the trend though, and can effectively meet the brewing need, its employing a roll-up strategy too. A roll-up strategy is simply the assimilation of several similar small businesses into one unit, with the end goal of becoming more effective and more profitable as a cohesive company. It's working. In fact, we've already seen the proverbial proof of the pudding. You may recall the last time we got an update on the company's quarterly results in October they were more than encouraging. Fiscal Q'1s top line of $35.9 million was up 7% on a year-over-year basis, and up 11% sequentially. Top line growth, however, wasn't the impressive aspect of those numbers. What was most compelling was the big increase in gross profits and the swing to positive cash flow. It shouldn't be surprising, really. The whole point of a roll-up is to increase scale, share expenses, and produce profits that couldn't be achieved as fragmented units. It was still the first time anyone could objectively say, though, the expansion strategy was working. I've got a feeling we're about to be able to say it again, this time with even more feeling. It was only a preliminary report for the prior quarter, and didn't offer any specifics about cash flow or EBITDA, but the top-line estimate of $41 million for the quarter ending in November speaks volumes about what to expect in the middle of the month when all of the official numbers are filed. That top line is 24% better than the year-ago revenue total, and 14% stronger than the prior quarter's sales total. That's huge. As I said, we didn't get any other data besides the revenue projection. Knowing that earnings and cash flow are growing at a faster rate than revenue is as the company expands, however, it wouldn't be out of line to expect another outsized jump in gross profits and cash flow... to levels few could have even imagined a year ago. It may well be the company's biggest trophy yet. Here's a look at the growth chart we can create so far. I'll fill in the blanks when we get the rest of the data. Based on what we can see already though, there's no denying all the numbers are on the right trajectory. The end-goal all along has been the creation of a company that drives $300 million in annual sales. We're more than halfway there, and more important, operating earnings are starting to emerge. I can't wait to see what the numbers look like when revenue reaches the $300 million mark. Yikes It wouldn't be hyperbole to say everything changed for stocks today. That's not a prediction of a bear market; I don't think we're quite to that point. It is to say, however, thanks to today's dip to lows below Monday's lows most of the indices are now under some major lines in the sand. This should change the way you see things (and the way you trade), if only out of rekindled respect for the fact that not every dip is shrugged off before it turns into a full-blown correction. With that as the backdrop, here's the daily chart of the NASDAQ Composite. Here's the weekly chart of the NASDAQ. Like I said, things changed. Even if they didn't change for the long-term, the intermediate-term outlook just got real interesting. Some turbulence you can just ride out. The turbulence on the horizon right now, however, may not be something to simply deal with. It may require action. Heck, it may even merit a bearish trade or two to offset the setbacks you could be near logging with the long-term holdings you can't sell yet... or don't want to sell. This is when you need to tap the shoulder of a team of people who can handle the brewing headwind, and walk you through the nasty stuff the market is going to throw your way. Better yet, this is when you need someone who's equipped to spot the exact bottom for the market, and tell you when it makes sense to wade back into stocks on a short-term and a long-term basis. Yep, I'm talking about John Monroe and the Elite Opportunity crew. Just as a reminder, it was the EO newsletter that perfectly nailed the October-2014 bottom, and it was the EO newsletter that found the exact August 2015 bottom too. John also named some specific trades you could easily step into to make the most of those moves, but just as important, John Monroe made several bearish suggestions leading up to those market lows. My point is, with the market now officially in rougher waters, you don't want to be navigating the mess on your own. Put the power of the professional at your fingertips. Subscribe to the Elite Opportunity newsletter and survive the next few weeks. Heck, you may end up thriving in them. Here's how.