Geographically diversified professional staffing firm Hudson Highland (NASDAQ:HHGP) lowered its 2005 earnings guidance Thursday. The stock market reacted by at one point removing a full one-third of the company's valuation. In short: Blood is running in the streets, and a buying opportunity may be at hand.

Employer hiring freezes in Australia, political uncertainty after the election in New Zealand, softer-than-expected demand, and contracting prices for information technology and accounting staff in North America caused the company to lower fourth-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) estimates from a range of $30 million-$34 million to a range of $27 million-$30 million, after having raised guidance at the end of October.

The company's stock reached an all-time high last week, a price that was roughly double where the stock sat 52 weeks ago. The company has strengthened its balance sheet in July by selling 3.2 million shares for net proceeds of $47.99 million, and it was looking to ramp up its earnings significantly -- twice this year's rate. Analysts were looking for earnings of $1.37 in 2006, more than four times this year's projected earnings.

Despite the recent bad news, Hudson Highland is making a transition from its money-losing ways of 2003, to almost profitable in 2004, to profitability (an analyst estimated $0.30 a share) in 2005. But with today's warning, the rate at which this company builds its margins into 2006 is now in question, despite what appears to be a relatively strong job and recruitment marketplace.

But investors would be wise to note that profitability is not the issue. It is the rate of profit growth. Before today's news, analysts were expecting 32.5% annual growth for the next five years.

The company will not update its 2006 guidance until early next year. But the job market is doing fairly well, and as the job market goes, so goes the staffing industry. Robert Half (NYSE:RHI) and online recruiter Monster (NASDAQ:MNST) have borne that out in their recent results. For that matter, Hudson Highland has seen fairly strong increases in its year-over-year profitability. Today's fall in the stock price has discounted a lot of future growth, a drop that I wouldn't call fully warranted to the extent that the external market factors support future growth.

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Fool contributor W.D. Crotty does not own any shares in the companies mentioned. Click here to see The Motley Fool's disclosure policy.