Improving Job Numbers Means Better Times For Staffing Providers: Kforce Inc. (KFRC), Trueblue Inc. (TBI)

In what appears to be best described as the lowest level of unemployment in five years, the U.S. Labor Department said yesterday that jobless claims fell 10,000 to a seasonally adjusted level of 332,000.

In simple terms, this indicates fewer people are losing their jobs, and hiring is on the rise in the U.S. The U.S. unemployment rate, which started 2013 below 8%, fell further in February to 7.7%, marking a four-year low. This upbeat scenario directly affects recruiting solutions providers such as Kelly Services, Inc. (NASDAQ:KELYA) , Trueblue Inc. (NYSE:TBI), and Kforce Inc.  (NASDAQ:KFRC) .

These stocks have already appreciated in recent months but it would be a fallacy to assume the gains will be limited to current levels.  Here is a closer look at each company.

Kelly Services is best known as a specialized player in providing professional and technical employees in the fields of education, legal, health care, and creative services. This staffing firm’s stock has been moving up steadily since early December but still trades below the book value of $19.90. The stock has gained 24 percent over the quarter but continues to trade above the key moving averages, which indicates the rally is likely to go on for some more time. Although the 1 percent dividend yield is not very attractive, it nevertheless reinforces the fact that the company has returned to profits. At a forward price earnings multiple of less than 11.5 and with near zero debt on the balance sheet, the stock looks attractively priced.

Washington-based Trueblue Inc. (NYSE:TBI) specializes in temporary blue-collar staffing services. This stock has managed nearly a 50 percent return over the last three months. More importantly, the rally has been uninterrupted except for some technical corrections. On an annual level, the gains are moderate at 23 percent. However, the stock appears to have moved ahead of fundamentals, as a look at the most recent full year reveals that its top line and profits grew only 5.5 percent and 9.2 percent, respectively. Considering this, the gains over the last 12 months appear to be on the higher side, although this analysis will be greatly challenged when it integrates the recently acquired MDT Personnel into its books. For the immediate future, the stock has already reached its price target of $21.50 by Deutsche Bank. and thus may be ripe for a correction now. But over a longer time frame, it may resume its uptrend.