Administaff, Inc. (ASF)

Administaff is poised to reap the rewards of decreasing unemployment over the next few years.

The Company:
Has a strong brand name.
Strong management lead by one of the co-founders of the company.
Arnold Palmer as the face of the company.
HR is something that is a necessity for any business and targeting small and medium businesses allows owners to focus on other things rather than mundane HR stuff.

The Fundamentals:
200 million in the bank (~30% of market cap).
No debt.
Positive free cash flow since at least 2004.
12% insider holding.
P/FCF of 6.02
Buys back stock and pays dividends.

Valuation:
Short term there are probably rough times ahead for Administaff. But this is a solid company with a great brand name that should have no problem rebounding when times get better. A great value at this price.

No debt!

Strong balance sheet. Above average earnings growth trend. Fairly low PE. Reasonable dividend.

back-end office work can be out sourced easily so you can focus on mission / goal / fun stuff.

Research firm IDC forecasts double-digit growth in HR outsourcing over the next five years, especially among small businesses, Administaff's specialty.

Plans to add 50 sales offices to the existing roster of 49 may prove wise, given the underpenetration of HR outsourcing with small businesses.

Diversified geographical reach relative to competitors gives Administaff an advantage when bidding for small but national businesses. This also provides insulation against local recessions.

This industry is very vunerable to the current ecomonic situation. Unlike other posters, my view is in a resession ecomony small employers hunker down and reduce costs (any external costs possible). There will be pricing preasure on ASF's premium fees. In addition, as smaller employers shrink the number of employees managed by ASF will shrink as well. If this shrinkage is not offset by business growth profitablitiy will suffer.

Morningstar small cap 5-star pick

Price is down and I like the prospects of temp hiring in lieu of permanent hiring during slow comeback after recession.

competition is of concern...their prices are more than double for same service.

Wished I had shorted these when the newletter picked them to out perform.

This, and other well-run stocks in the same business should do well long-term. Outside of certain regional difficulties (like Detroit metro) the U.S. is very much of an employee's market for years, having much less to do with the overall economy than basic age demographics. The age-mix in the U.S. is trending older (i.e.people who tend to run and manage businesses) rather than younger (entry level, and young professionals) and will do so for many years to come, based on the current birth rate. Capitalizing on this situation will be firms like Administaff and workers themselves. By far the biggest challence for staffing firms will be hiring enough people to fill the orders that are coming in.

This is also a great stock for future investing

Tim Hanson

Nice P/E and a lot of cash.
Solid financial statements, and has been beaten up a little by the market. Should generate ncie profits in the coming years and some real solid returns.

The trend to outsource HR functions should keep right on growing regardless of whether or not a recession is coming or not.

Best entry point in awhile.

Long-term revenue growth of 10+% and EPS of 15% possible. Very low market penetration = large opportunity. Near term gross profit shortfall due to non-recurring large WC/health care claims. Should normalize by Q207. Could also be acquired by a company like ADP (lots of room to rationalize cost structure). Risk: Weaker labor market, but should be less sensitive than a staffing co. Also, if gross profit disappoints in the next few quarters, overall valuation multiples might take a hit.

It can negociate for larger groups of employees since it pools workers and "farms" them out. This allows it lower costs on providing benefits to its staff and lowers costs.