The last four quarters have not been kind to investors in Resources Global (NASDAQ:RECN). The firm missed earnings estimates thrice, matched them only once, and beat them not at all. As Sarbanes-Oxley gets ever longer in the tooth, can the SOX-powered firm turn its fortunes around? We'll get our next clue on Thursday, when RG reports its fiscal Q2 2007 results.

What analysts say:

  • Buy, sell, or waffle? Fourteen analysts now follow RG, which garners eight buy ratings and a half-dozen holds.
  • Revenues. On average, they're looking for 12% sales growth to $176.4 million.
  • Earnings. Profits are predicted to fall 13% to $0.27 per share.

What management says:
Look at that revenue estimate again, and you'll notice two things. First, it's ahead of what the company itself promised: 11% growth and $175 million in sales this quarter. Second, it's far behind the "reach target" that management has mentioned setting for itself -- specifically, 15%-18% growth this fiscal year.

Considering that RG only managed to grow its sales 10% last quarter, though, I expect investors will hold the firm to the analysts' higher target on Thursday, rather than to the company's own lower target. Failing to match, or better yet, beat the analysts' number would put RG's ability to hit its reach target increasingly in doubt.

What management does:
Rolling gross margins halted their long slow slide last quarter, but continued investment in expanding its business -- especially overseas -- has continued to boost selling, general, and administrative expenses (SG&A) far in excess of sales growth. SG&A up 19% vs. 10% sales growth in the last six months, plus the added margin pressure of expensing stock options, have put a real squeeze on the firm's operating and net margins.

Margins %

5/05

8/05

11/05

2/06

5/06

8/06

Gross

39.6

39.6

39.5

39.3

39.3

39.4

Op.

17.2

17.0

16.3

15.5

15.0

14.5

Net

10.4

10.4

10.1

9.8

9.6

8.7
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
No sooner had Wall Street done its about-face and decided RG was a great investment back in October than Fool co-founder Tom Gardner decided the opposite. Citing "substantial" slowing in the firm's revenue growth over the past 12 months and admitting that the firm's initial skeptics haven't been entirely wrong about RG's overdependence on SOX work, Tom dropped RG into the ranks of his "second team" of Motley Fool Stock Advisor recommendations in his six-month portfolio review last month. Far from a "sell rating," it does look like Tom is getting more lukewarm on the company's ability to reward shareholders going forward.

For my part, I'm inclined both to agree and to defer judgment two more days. If RG can beat analyst estimates for it on Thursday, that will give the firm a fighting chance of hitting its revenue goal for the year -- and put a nice gloss of reliability on the firm's ability to forecast its business. On the other hand, if RG fails to record double-digit sales growth, it'll put the firm's fiscal year revenue goals in grave doubt.

Competitors:

  • Adecco (NYSE:ADO)
  • Robert Half International (NYSE:RHI)

Customers:

  • ConocoPhillips (NYSE:COP)
  • Cummins (NYSE:CMI)
  • SouthWest (NYSE:LUV)
  • Tyco (NYSE:TYC)

Not sure whether you should invest in Resources Global? Get the CEO's own views on its future in our recent interview with Donald Murray. Then play fly on the wall at the firm's last conference call, and see how much (if anything) has changed, in "Fool on Call: Resources Discovered."

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Fool contributor Rich Smith does not own shares of any company named above. Tyco is an Inside Value pick. The Fool has a disclosure policy.