Barrett Business Services (NasdaqGS:BBSI) - Share price, News & Analysis

Q: What is the Fair Price of BBSI when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

BBSI ($85.55) is trading below our estimate of [[fair value]] ($128.03)

BBSI fundamental analysis
Snowflake Score
Valuation	5/6
Future Growth	1/6
Past Performance	4/6
Financial Health	6/6
Dividends	3/6

BBSI Stock Overview

Barrett Business Services, Inc. provides business management solutions for small and mid-sized companies in the United States.

Rewards

Trading at 33.2% below our estimate of its fair value

Earnings are forecast to grow 7.58% per year

Earnings have grown 8.6% per year over the past 5 years

Risk Analysis

High level of non-cash earnings

Significant insider selling over the past 3 months

Barrett Business Services Competitors

Kelly Services

NasdaqGS:KELY.A

US$695.2m

TrueBlue

NYSE:TBI

US$728.9m

Heidrick & Struggles International

NasdaqGS:HSII

US$622.9m

Kforce

NasdaqGS:KFRC

US$1.2b

Price History & Performance

Summary of all time highs, changes and price drops for Barrett Business Services
Historical stock prices
Current Share Price	US$85.55
52 Week High	US$86.82
52 Week Low	US$57.76
Beta	1.39
1 Month Change	11.47%
3 Month Change	20.37%
1 Year Change	14.77%
3 Year Change	-2.53%
5 Year Change	75.24%
Change since IPO	3,058.77%

Recent News & Updates

Aug 19

Barrett Business Services: A Stock Repurchase Program That Makes Sense

With a management platform bringing knowledge from the management consulting industry and the human resource outsourcing industry, Barrett Business Services has been successful since 1965. Let’s point out that the company counts with a network of insurance brokers, financial advisors, attorneys, and CPA’s that introduce the software to clients. I also believe that in the near future, economies of scale and leverage will help enhance the free cash flow margins. The company recently reported a new stock repurchase program, which will likely enhance value generation for shareholders in the coming months. Barrett Business Services (BBSI) counts with expertise accumulated since 1965 and an extensive network of referrals, which will likely help enhance sales growth. Under the most optimistic case scenario that includes M&A operations and geographic expansion, my DCF model resulted in a valuation of $155 per share. In my view, even considering risks from geographic concentration of revenue in California and failure of partner agreements, the current stock price appears too low. Barrett Business Services: Better Guidance And A Stock Repurchase Program Barrett Business Services, Inc., offers business management solutions. With a management platform bringing knowledge from the management consulting industry and the human resource outsourcing industry, the company has been successful since 1965. Investor Presentation Let us go straight to the point. In my view, there are two main reasons to have a look at Barrett Business now. First, management recently increased its guidance. Second, gross billings are now expected to grow at close to 13% y/y. In my view, as soon as traders have a look at the new guidance, the stock price will most likely trend north: In light of the strong performance in the second quarter, BBSI is increasing its outlook for 2022 and now expects the following: Gross billings growth of 11% to 13%, increased from 10% to 12% in the prior outlook. Source: BBSI Reports Strong Second Quarter 2022 Financial Results Besides, the company recently reported a new stock repurchase program, which will likely enhance value generation for shareholders in the coming months. We are talking about the acquisition of $75 million of stock over the next two years: On February 28, 2022, BBSI’s board of directors approved a new stock repurchase program authorizing the Company to purchase up to $75 million of its stock over a two-year period. Source: BBSI Reports Strong Second Quarter 2022 Financial Results Great Expectations From Other Financial Analysts Analysts out there are quite optimistic about Barrett Business Services. They believe that net sales growth could stand at 10% in 2022 and 7.39% in 2023. In 2022 and 2023, the EBITDA margin is expected to reach 5% to 6%, and the net income would grow to $49 million in 2023. These numbers made me interested in the company, and I decided to form my own opinion. Other Investment Analysts Let’s finally note that the average target price by the analysts stands at $107 with a high price target of $117 and a low-price target of $101. I obtained much more optimistic results. Other Investment Analysts Balance Sheet As of June 30, 2022, Barrett Business Services reports $34 million in cash, $756 million in total assets, and an asset/liability ratio of 1x-2x. The company’s financial situation appears solid. Quarterly Report Management does not report debt, which most financial advisors would appreciate. With that, long-term operation lease liabilities stand at $13 million, and accrued payroll, payroll taxes, and related benefits stand at $282 million. Long-term workers compensation claims liabilities are equal to $172 million. Let’s tell it this way, employees and workers seem to be financing part of the company’s operations. Quarterly Report The Most Likely Scenario Includes 7.5% Sales Growth And A Fair Price Close To $125 Under normal conditions, I believe that organic growth will continue to play a major role. The company knows well how to add new clients as well as design new products. Keep in mind that management counts with know-how accumulated since 1965. I also believe that in the near future, economies of scale and leverage will help enhance the free cash flow margins. These business catalysts were depicted in a recent presentation to investors. Investor Presentation In my opinion, if the management successfully hires new business teams in existing branches, client referrals will most likely help generate revenue growth. More revenue growth will likely help push the company’s valuation up: We believe our clients are one of our best advocates and powerful drivers of referral-based growth. In each market, operations teams provide expertise, consultation and support to our clients, driving growth and supporting retention. We anticipate that by adding business teams to existing branches, we can achieve incremental growth in those markets, driven by our reputation and by client referrals. In most markets business development efforts are led by area managers and are further supported by business development managers. Source: 10-k I also believe that the role of partners will likely help Barrett Business find new clients. Let’s point out that the company counts with a network of insurance brokers, financial advisors, attorneys, and CPAs that introduce the software to clients. Under this case scenario, I assumed that the network built for many years will continue to enhance business: Our business growth has three primary sources: referrals from existing clients, direct business-to-business sales efforts by our area managers and business development managers, and an extensive referral network. Partners in our referral network include insurance brokers, financial advisors, attorneys, CPAs, and other business professionals who can facilitate an introduction to prospective clients. Source: 10-k Considering previous sales growth, I believe that sales growth at around 7.5% y/y is likely. It means that the company would deliver close to $2.17 billion in sales in 2032. If we also assume an EBITDA margin around 5.5% and D&A/Sales close to 0.65%, non-operating profit after tax would stand at almost $80 million by 2032. I believe that my numbers are conservative. Author's Work If we add D&A between $5 million and $15 million, and subtract capex around $7.5 million and $15 million, the free cash flow would stay between $30 million and $120 million. With a discount of 11.855%, the net present value of future free cash flow would stand at almost $450 million. Author's Work Peers trade at an average of close to 7x EBITDA. However, I believe that Barrett Business could trade at 10x EBITDA considering sales growth close to 7.5% and the previous EBITDA margin assumption. SA With the previous figures, I obtained an implied enterprise value of $800 million and an equity close to $892.1 million. The fair price would stand at $125 per share, and the IRR could be close to 5%.

Aug 08

Barrett Business Services' (NASDAQ:BBSI) Dividend Will Be $0.30

Barrett Business Services, Inc. ( NASDAQ:BBSI ) has announced that it will pay a dividend of $0.30 per share on the 2nd...

Shareholder Returns

	BBSI	US Professional Services	US Market
7D	2.6%	1.3%	1.4%
1Y	14.8%	-9.9%	-8.4%

Return vs Industry: BBSI exceeded the US Professional Services industry which returned -9.6% over the past year.

Return vs Market: BBSI exceeded the US Market which returned -9% over the past year.

Price Volatility

Is BBSI's price volatile compared to industry and market?
BBSI volatility
BBSI Average Weekly Movement	3.9%
Professional Services Industry Average Movement	6.5%
Market Average Movement	7.6%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.1%

Stable Share Price: BBSI is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: BBSI's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1965	121,660	Gary Kramer	https://www.bbsi.com

Barrett Business Services, Inc. provides business management solutions for small and mid-sized companies in the United States. The company develops a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry. It offers professional employer services under which it enters into a client services agreement to establish a co-employment relationship with each client company, assuming responsibility for payroll, payroll taxes, workers’ compensation coverage, and other administration functions for the client’s existing workforce.

Barrett Business Services Fundamentals Summary

How do Barrett Business Services's earnings and revenue compare to its market cap?
BBSI fundamental statistics
Market Cap	US$606.44m
Earnings (TTM)	US$43.85m
Revenue (TTM)	US$1.01b

13.8x

P/E Ratio

0.6x

P/S Ratio

Is BBSI overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
BBSI income statement (TTM)
Revenue	US$1.01b
Cost of Revenue	US$788.66m
Gross Profit	US$223.41m
Other Expenses	US$179.56m
Earnings	US$43.85m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	6.19
Gross Margin	22.07%
Net Profit Margin	4.33%
Debt/Equity Ratio	0%

How did BBSI perform over the long term?

See historical performance and comparison

Dividends

1.4%

Current Dividend Yield

20%

Payout Ratio

Does BBSI pay a reliable dividends?

See BBSI dividend history and benchmarks

When do you need to buy BBSI by to receive an upcoming dividend?
Barrett Business Services dividend dates
Ex Dividend Date	Aug 18 2022
Dividend Pay Date	Sep 02 2022
Days until Ex dividend	2 days
Days until Dividend pay date	13 days

Does BBSI pay a reliable dividends?

See BBSI dividend history and benchmarks

We’ve recently updated our valuation analysis.

Valuation

Is BBSI undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for BBSI?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for BBSI. This is calculated by dividing BBSI's market cap by their current preferred multiple.
What is BBSI's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$606.44m

BBSI key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	0.5x
Enterprise Value/EBITDA	9.2x
PEG Ratio	1.8x

Price to Earnings Ratio vs Peers

How does BBSI's PE Ratio compare to its peers?

BBSI PE Ratio vs Peers

The above table shows the PE ratio for BBSI vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	10.7x
KELY.A Kelly Services	11.6x	112.1%	US$695.2m
TBI TrueBlue	9.9x	-0.05%	US$728.9m
HSII Heidrick & Struggles International	7.8x	-17.1%	US$622.9m
KFRC Kforce	13.5x	-2.8%	US$1.2b
BBSI Barrett Business Services	13.8x	7.6%	US$606.4m

Price-To-Earnings vs Peers: BBSI is expensive based on its Price-To-Earnings Ratio (13.8x) compared to the peer average (10.7x).

Price to Earnings Ratio vs Industry

How does BBSI's PE Ratio compare vs other companies in the US Professional Services Industry?

Price-To-Earnings vs Industry: BBSI is good value based on its Price-To-Earnings Ratio (13.8x) compared to the US Professional Services industry average (19.1x)

Price to Earnings Ratio vs Fair Ratio

What is BBSI's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

BBSI PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	13.8x
Fair PE Ratio	15.6x

Price-To-Earnings vs Fair Ratio: BBSI is good value based on its Price-To-Earnings Ratio (13.8x) compared to the estimated Fair Price-To-Earnings Ratio (15.6x).

Share Price vs Fair Value

What is the Fair Price of BBSI when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: BBSI ($85.55) is trading below our estimate of fair value ($128.03)

Significantly Below Fair Value: BBSI is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.

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Future Growth

How is Barrett Business Services forecast to perform in the next 1 to 3 years based on estimates from 4 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

7.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: BBSI's forecast earnings growth (7.6% per year) is above the savings rate (1.9%).

Earnings vs Market: BBSI's earnings (7.6% per year) are forecast to grow slower than the US market (14.4% per year).

High Growth Earnings: BBSI's earnings are forecast to grow, but not significantly.

Revenue vs Market: BBSI's revenue (7.5% per year) is forecast to grow slower than the US market (7.8% per year).

High Growth Revenue: BBSI's revenue (7.5% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if BBSI's Return on Equity is forecast to be high in 3 years time

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Past Performance

How has Barrett Business Services performed over the past 5 years?

Past Performance Score

4/6

Past Performance Score 4/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

8.6%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: BBSI has a high level of non-cash earnings.

Growing Profit Margin: BBSI's current net profit margins (4.3%) are higher than last year (4.2%).

Past Earnings Growth Analysis

Earnings Trend: BBSI's earnings have grown by 8.6% per year over the past 5 years.

Accelerating Growth: BBSI's earnings growth over the past year (14.8%) exceeds its 5-year average (8.6% per year).

Earnings vs Industry: BBSI earnings growth over the past year (14.8%) underperformed the Professional Services industry 23.3%.

Return on Equity

High ROE: BBSI's Return on Equity (25.1%) is considered high.

Discover strong past performing companies

Financial Health

How is Barrett Business Services's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: BBSI's short term assets ($510.5M) exceed its short term liabilities ($389.8M).

Long Term Liabilities: BBSI's short term assets ($510.5M) exceed its long term liabilities ($192.0M).

Debt to Equity History and Analysis

Debt Level: BBSI is debt free.

Reducing Debt: BBSI has no debt compared to 5 years ago when its debt to equity ratio was 6.6%.

Debt Coverage: BBSI has no debt, therefore it does not need to be covered by operating cash flow.

Interest Coverage: BBSI has no debt, therefore coverage of interest payments is not a concern.

Balance Sheet

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Dividend

What is Barrett Business Services's current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

1.40%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: BBSI's dividend (1.4%) isn’t notable compared to the bottom 25% of dividend payers in the US market (1.48%).

High Dividend: BBSI's dividend (1.4%) is low compared to the top 25% of dividend payers in the US market (3.99%).

Stability and Growth of Payments

Stable Dividend: BBSI's dividends per share have been stable in the past 10 years.

Growing Dividend: BBSI's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its low payout ratio (20.3%), BBSI's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: BBSI is paying a dividend but the company has no free cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

2.2yrs

Average management tenure

CEO

Gary Kramer (42 yo)

2.42yrs

Tenure

US$3,014,992

Compensation

Mr. Gary Edward Kramer serves as Chief Executive Officer and President at Barrett Business Services, Inc. since March 5, 2020 and its Director since May 27, 2020. Mr. Kramer served as Chief Financial and A...

CEO Compensation Analysis

Compensation vs Market: Gary's total compensation ($USD3.01M) is about average for companies of similar size in the US market ($USD3.83M).

Compensation vs Earnings: Gary's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: BBSI's management team is considered experienced (2.2 years average tenure).

Board Members

Experienced Board: BBSI's board of directors are considered experienced (5.7 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: BBSI insiders have sold more shares than they have bought in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/18 00:00
End of Day Share Price	2022/08/18 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31