If something is a bane to one company, odds are it's a boon to another one. While the merits of Sarbanes-Oxley legislation are a topic for another day, there's no question that it has created compliance headaches for many companies. For business-services provider Resources Connection
Boosted in part by Sarbanes-Oxley, Resources Connection posted a very solid fourth quarter. Revenue climbed 40%, and net income grew 47%. The company had 111 companies contribute $1 million or more in revenue during the quarter -- more than double the year-ago level -- and added about 27% more clients.
Over time, Sarbanes-Oxley might prove to be the gift that keeps on giving. Though business tied specifically to Sarbanes-Oxley may well begin to taper off, the legislation has served as a valuable introduction for Resources Connection. In initially contracting for SOX business, it has had a great record of converting customers into ongoing clients for other services and support projects.
So unlike the Y2K-bug consultants, Resources Connection actually has a second act that could be far better than the first. Whether through its supply-chain management, tax projects, or human resources support, the company has a lot of ways to help its clients improve their business operations. What's more, a certain level of ongoing need for these services should become built in as companies grow and business becomes more complex.
That's not to suggest completely smooth sailing for the company and its investors. First of all, once expensed, stock option costs will take a fair bite out of reported earnings. Second, as the company grows, it will become harder to maintain the esprit de corps and the initial corporate culture that has served the company so well. Finally, there are plenty of competitors out there to compete with Resources Connection, and that isn't about to change.
Although I'm keeping this stock on my watch list, last Wednesday's jump makes it a little pricey for me. Of course, should Resources Connection manage to make itself the next Accenture
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).