The more money they lose, the higher the stock price goes.Â Explain it to me, somebody, please.
Public staffing company On Assignment issued a positive forecast for 1Q2011, and I guess thatâ€™s enough for its stock price to continue an upward trend that started last May.
I looked high and low for good news about the company whose revenues have dropped like a rock during the recent downturn.Â Itâ€™s true that the company reported only a small loss in the recent fiscal year, but a closer look at its balance sheet puts that positive spin in question.
Particularly troubling there is a mysteriously large value in an account called â€śGoodwillâ€ť.Â $214 million to be exact according to the statement on Yahoo! of which a mere $15 million was declared impaired in 2010.Â How can that be?Â Â How can a company that clearly has been downsizing faster than Blockbuster declare that its acquisitions from years ago still constitute a value of that magnitude.
Maybe accounting standards allow for it, but youâ€™d have trouble convincing me that those acquisitions are still worth anything north of say zero which would mean that the company has actually been losing $50 million or more per year since the downturn began.
Past disasters with acquisitions havenâ€™t lightened On Assignmentâ€™s appetite, however.Â CEO Peter Dameris is quoted in a recent BusinessWire press release as saying that â€śâ€¦we continue to see good acquisition opportunities that can complement our organic growth. Last month, we executed a letter of intent to acquire one of the largest privately owned clinical staffing firms in Western Europe.â€ť
Hmm, what organic growth is he talking about?Â The increase in the most recent quarter?Â Certainly not the decrease of almost 33% from 2008 to 2009.Â
On Assignment does have one defender, commandor58, who commented on its stock bbs that:
â€śASGN has made two accretive acquisitions this year-yet the market doesn't care. Temp employment is up a greater % than employment in general-yet the market doesn't care. White collar talent is still in short supply-yet the market doesn't care. At some point in time, the market will care as ASGN, along with many other staffing stocks will rise a substantial %.Â
Over the course of many CCs that I have listened to this year, many companies are saying that corp American cut too much in 2009. As a consequence, companies are choosing to hire temp staff vs permanent employees. High valued added white collar worker staffing firms should benefit the most. I bought some ASGN today and like KFRC as well.â€ť
Whatever.Â Maybe commander58 knows something I donâ€™t.Â In any case, investors like these kinds of losses, because On Assignment is far from unique in sporting this rising stock with large loss combo:
Like I said, explain it to me somebody, please.