Labor Ready: Helping business solve temporary staffing problems

The difference between success and failure of a business venture sometimes depends on how quickly management can find reliable temporary help for specific projects. America's largest source for assistance along that line is headquartered in Tacoma, Washington.

Labor Ready (NYSE: LRW) provides temporary employees for manual labor, light industrial and skilled construction trades. The firm serves some 300,000 small and mid-sized businesses in the construction, warehousing, hospitality, landscaping, transportation, light manufacturing, retail, wholesale and sanitation industries. Labor Ready operates through 913 branches in the United States, Canada, Puerto Rico, and the United Kingdom.

The company surprised the Street last week, when it reported Q1 EPS of 21 cents and revenues of $290.2 million. Analysts had been looking for 16 cents and $281.3 million. Management also guided Q2 EPS to 33-35 cents (31 cent consensus), Q2 revenues to $337-$340 million ($327.19M consensus), FY07 EPS to $1.40-$1.45 ($1.24 consensus) and FY07 revenues to $1.35-$1.37 billion ($1.33B consensus). The board boosted its buyback authorization by $100 million. LRW shares popped through 30-day, 50-day and 90-day moving average resistance on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with one "strong buy," two "buys," six "holds" and two "sells." Analysts see a 17% annual growth rate, through the next five years. The LRW P/E ratio (14.84), PEG ratio (0.87), Price to Sales ratio (0.81), Price to Book ratio (3.10), Price to Cash Flow ratio (12.50), Price to Free Cash Flow ratio (11.50), Return on Assets (13.14%), Return on Investment (15.88%) and Return on Equity (21.81%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 94% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $14.94 and $27.75. A stop-loss of $18.75 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.