Business Services Sector Continues to Grow in Recovering Economy

Article of the Week from About Small Cap Stocks

Written by Allen Caron

The business services sector encompasses a wide variety of enterprises that help other businesses grow and become more profitable. These organizations may vary from accounting firms to cloud-based IT service companies. The one thing they have in common is they provide a mechanism for businesses to outsource tasks and services that are necessary for their businesses to function smoothly but are not core to their revenue-generating activities.

In the 18 months since we’ve last covered business services, unemployment rates have dropped from 8.3% to 7.4% – still a far cry from pre-recession days, but an improvement nonetheless. With more companies hiring, the business services sector continues to pick up, largely because outsourcing both tasks and in some cases, entire departments, can often be a cost-effective move for SMEs (small and medium enterprises).

Checking in on the business services sector, we see that many of the companies we covered in the previous article have shown rapid mid-term increases, with several companies nearly doubling their stock price in the last 18 months. Here is a brief update on the business services companies we covered in our last article:

• CDI Corp. (NYSE:CDI), based in Philadelphia, PA, offers both engineering and IT solutions for businesses. Their business focuses on three segments, each of which provides staffing and recruiting solutions for companies looking to hire technologically skilled workers. By removing the need for companies to find skilled workers on their own, CDI Corp is more able to focus on their core business, rather than on the recruiting and hiring process. Last time we discussed CDI, they had a market cap of $287 million, with shares trading at $14.97. CDI closed August 23rd at $14.17, down $0.20, with a market cap of $273.44 million. Their 52-week trading range is $13.35 – $18.00.
• Wilmington, MA-based UniFirst Corp. (NYSE:UNF) provides uniforms and protective wear. Not only do they design and manufacture specialized work wear, they also rent and clean uniforms, as well as provide uniform management. They also provide companies with restroom products and first-aid kits. The company has been in business for nearly 80 years, providing specialized corporate uniform services. In the last 18 months, the company’s market cap has nearly doubled, moving from $1.2 billion to $2 billion. The last time we checked in with UNF, the company’s shares were selling for $61.61. UNF closed August 23rd at $99.79, down $0.27, with a market cap of $2 billion. Their 52-week trading range is $62.40 – $104.38.
• Volt Information Sciences, Inc. (OTCMKTS:VISI), based in New York, NY, is a specialized staffing and telecommunications company that provides services around the world. Not only do they provide installation and maintenance of telecommunications equipment, they also help with talent searches and consultations. While Volt Information Sciences grew in the first half of the year, its shares have dropped to $7.12. VISI closed August 23rd at $7.12, no change for the day, with a market cap of $148.19 million. Their 52-week trading range is $5.80 – $8.74.
• Finally, Minnetonka, MN-based G&K Services Inc. (Nasdaq:GK) also provides uniforms and uniforms services for companies, along with special-purpose floor covering and maintenance service products. The company achieved 10 percent margin growth in Q2 of 2013 and has cracked the $1 billion mark for their market cap, making them a solid mid small cap. GK closed August 23rd at $54.04, down $0.43, with a market cap of $1.07. Their 52-week trading range is $29.80 – $55.58.

Business service companies provide a quite diverse selection of essential services to their clients, but as a whole, they tend to be doing quite well right now. As the economy continues to recover, these companies may continue to grow as other businesses look to cut costs through outsourcing.

NOTE: The “AboutSmallCap” blog covers breaking news on small cap stocks from around the world, delving deep into pressing issues both large and small that affect small caps. For example, we recently covered groundbreaking news about artificial heart technology in the small cap world. We write about things like natural gas drilling and interviews with notable personalities across a wide variety of industries, like Elemer Piros in the biotech sector.