Tuesday, December 9, 1997

General Employment Enterprises
(AMEX: JOB)
Phone: 630-954-0400
Website: http://www.generalemployment.com
Price (12/8/97): $16


HOW DID IT DOUBLE?

General Employment Enterprises sounds boring enough to be a part of the federal government's bureaucracy. But this temp agency has been anything but dull, doubling since April thanks to the strong economy and continued high demand for the kind of information technology personnel it employs.

The FY97 numbers announced Nov. 11 tell the story. Earnings per share shot up 43% on 26% higher sales, thanks in part to the 21% higher average placement fees it collects for finding employees permanent jobs. General has also opened up new fronts by adding 15 branch offices in the last two years. Same-store sales are also growing.

Find a profitable business in a hot market, and you're likely to find a Double.

BUSINESS DESCRIPTION

General Employment offers professional staffing services in the areas of information technology (IT), engineering, and accounting. About 70% of revenue comes from placing people in full-time jobs; the company takes a percentage of the applicant's projected annual salary. The rest comes from its corps of temps, which work for a client for 3 to 12 months. The company bills for these services on a hourly basis.

General Employment operates 39 offices in major cities in 14 states, particularly California and Illinois. It uses the trade names Omni One, Triad Personnel Services, and Business Management Personnel.

Insiders own 30% of the company. Chair/CEO Herbert Imhoff, Sr. has been President of the firm since 1964 and Chair since 1968. On October 31, the stock split 3-for-2.

FINANCIAL FACTS

Income Statement
12-month sales: $29.3 million
12-month income: $2.4 million
12-month EPS: $0.60
Profit Margin: 8.2%
Market Capn: $65.8 million

Balance Sheet
Cash & Securities: $7.8 million
Current Assets: $12.3 million
Current Liabilities: $4.7 million
Long-term Debt: $0.4 million

Ratios
Price-to-earnings: 26.7
Price-to-sales: 2.2

HOW COULD YOU HAVE FOUND THIS DOUBLE?

Demand for information technology personnel has perhaps never been stronger, as anyone who's heard of the Internet or the "Year 2000" problem should know. Since General Employment makes most of its money placing such skilled people in full-time jobs, the company seemed well positioned to benefit, assuming it could find potential candidates for placement.

FY96 had been an excellent year, with sales up 39% and earnings up 54%. The quarterly financial numbers for FY97 consistently revealed strong sales with rising margins -- a good screen for potential Doubles.

In April, after second quarter sales increased 26% and net income jumped 68%, the stock was trading at just $6 a share. The firm was sporting a price-to-earnings multiple of 12 at a time when increasingly profitable sales were growing at twice that clip.

WHERE TO FROM HERE?

CEO Imhoff sees continued growth ahead. Demand for IT staffing should remain strong. Plus, as General Employment's new offices mature, they will contribute higher profits. The company also intends to open 12 new offices this year and 16 more in FY99.

This rosy outlook should translate into earnings of $0.77 per share for the year ending in September, according to one analyst surveyed by I/B/E/S. That gives us a PEG of 0.81 and a YPEG fair value of $21 based on projected long-term growth of 27%.

With nearly $2 a share in cash and very little long-term obligations, General Employment could be worth a closer look, particularly if it gives back any of its recent gains.

-- Louis Corrigan
(TMFSeymor@aol.com)


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