Companies of all sizes continue to focus on methods to maximize efficiency while keeping costs low. One of the main key areas that businesses are continuing to outsource in the name of efficiency and cost-cutting is human resources. The costs and effort associated with keeping up with the latest laws and rulings that impact human resource management can be extremely draining on a business and impede growth. Without dealing with the complex and highly time consuming process that is human resources, companies are able to focus on core business strategies and growing their business.
According to Technavio Research, analysts see the global human resource outsourcing market growing at a compound annual growth rate (CAGR) of nearly 13% from 2016 to 2020 and becoming a $284 billion market by 2020. Driving a majority of the growth will be recruitment process outsourcing (RPO) and professional employer organization (PEO) services, due to larger companies continuing to focus on cost cutting and lean methods. Technavio analysts further note that organizations that maintain in-house operations of human resources services spend 20% more than organizations that simply outsource the HR operations to a third party provider. These are real savings that add to the overall profitability and financial stability of an organization.
Trucept, Inc. (OTC Pink: TREP) delivers employment and professional employer organization (PEO) services. The company’s wide range of services include human resource management, employee benefits, insurance, workers’ compensation, payroll management, safety management, training services, and more. In addition to Trucept, Inc. (OTC Pink: TREP)’s human resource management business, the company provides temporary staffing services and a software licensing business that works with other staffing agencies. The company primarily targets small to medium size businesses and organizations within a variety of industries.
Employee benefits are a particular area of interest for Trucept, Inc. (OTC Pink: TREP) because they receive commissions on benefit sales, but most importantly, the company strives to deliver quality benefits that are generous and deliver value to the employee. Trucept, Inc. (OTC Pink: TREP) creates value for its business clients through outsourcing PEO and HR services that allows clients to focus on their core business and growth, provide superior employee benefits offerings that employees will want, and now streamline connecting workers and employers.
Major New App Release Aims To Disrupt Temp Staffing Industry
While there are other staffing agencies and companies that provide temporary employment solutions, Trucept, Inc. (OTC Pink: TREP) stands to be a major disruptor in the high-growth industry when it releases its Uber-like temporary staffing app in the coming weeks. The app is expected to deliver a similar experience to the Uber ride-sharing app, which will allow businesses to search for on-demand workers that are ready and able to work and close to their location. In other words, the app will be a whole new experience for connecting employees and employers. The company is not releasing too much more information before the launch in order to maintain secrecy and competitive edge from potential competitor copycat platforms.
Management expects the new app to be released to the Apple App Store and Google Play app stores over the coming months. Furthermore, management expects the app to be fully up and running at full capacity within the first to second quarter of 2017.
Trucept, Inc. (OTC Pink: TREP) Financials and Valuation Analysis
Now to Trucept, Inc. (OTC Pink: TREP)’s financials and competitor analysis. As of July 2016, Trucept, Inc. (OTC Pink: TREP) has a market cap of $628,277 and strong year to date returns of 25%. Looking at share structure, the company lists 500 million shares authorized, around 50.3 million shares outstanding, and a float of around 24.01 million shares, as of December 2015. During the first quarter 2016, Trucept, Inc. (OTC Pink: TREP) reported total revenue of over $1.3 million and net income of $697,000. Management is forecasting full year 2016 revenue of $60 million and net income of $2 million.
Trucept, Inc. (OTC Pink: TREP) primarily conducts employment and professional employer organization (PEO) services, but also has a software licensing business that works with staffing agencies. However, with the Uber-like app, Trucept, Inc. (OTC Pink: TREP) will be able to provide its customers with immediate access to short-term staff that is ready and able to work nearby. The company’s diverse business model and growth plans for the rest of 2016, should continue to help Trucept, Inc. (OTC Pink: TREP) attract market share and the attention of on-call workers looking for more access to work opportunities. Looking at Trucept, Inc. (OTC Pink: TREP)’s close competitors, we can establish a better sense of potential valuation and expectations for the company moving forward.
Fortune Industries, Inc. (OTC Pink: FDVF) is a provider of PEO services through its subsidiaries primarily in Tennessee, Colorado, Arizona, Utah, and Indiana. As of July 2016, the PEO provider has a market cap of nearly $16.1 million. Furthermore, Fortune Industries, Inc. (OTC Pink: FDVF) lists 150 million authorized shares, 55.5 million shares outstanding, and a float of nearly 4.7 million shares, as of December 2015. During the first quarter 2016, Fortune Industries, Inc. (OTC Pink: FDVF) posted revenue of nearly $16.88 million and net income of $973,000.
Barrett Business Services, Inc. (NASDAQ: BBSI) provides in PEO and staffing services to small and medium size companies. As of July 2016, Barrett Business Services, Inc. (NASDAQ: BBSI) has a market cap of nearly $305.1 million. Furthermore, business management solutions company has shares outstanding of 7.21 million and a float of 6.94 million shares, as of July 2016. During the first quarter 2016, Barrett Business Services, Inc. (NASDAQ: BBSI) reported total revenue of around $190.97 million, but a net loss of just over $8 million.
TriNet Group Inc (NYSE: TNET) is in the business of human resources and provides a wide-range of HR services such as payroll management, employee tax, workers’ compensation, benefits programs, claims management, and more. As of July 2016, TriNet Group Inc (NYSE: TNET) has a market cap of $1.56 billion, 70.7 million shares outstanding, and a float of 41.64 million shares. TriNet Group Inc (NYSE: TNET) reported first quarter 2016 revenue of $732.94 million and net income of $11.58 million.
Kelly Services, Inc. (NASDAQ: KELYA) is a global provider of workforce solutions, such as temporary staffing. The global workforce company primarily provides its solutions and services to the finance, accounting, engineering, healthcare, information technology, and science industries. Kelly Services, Inc. (NASDAQ: KELYA) has a market cap of $769.34 million, 34.58 million shares outstanding, and a float of 29.32 million shares, as of July 2016. During the company’s fiscal first quarter ending on April 3rd, Kelly Services, Inc. (NASDAQ: KELYA) reported total revenue of around $1.35 billion and net income of $11.2 million.
Paychex, Inc. (NASDAQ: PAYX) is a comprehensive provider of payroll, HR, business insurance, benefits, and staffing solutions to small and medium-sized companies. As of July 2016, Paychex, Inc. (NASDAQ: PAYX) lists a market cap of $21.77 billion, shares outstanding of 360.4 million, and a float of 321.73 million shares. During Paychex, Inc. (NASDAQ: PAYX)’s fiscal first quarter, which ended on February 29th, the HR and payroll company reported total revenue of $752.6 million and net income of $180.4 million.
First, without even analyzing competitors, Trucept, Inc. (OTC Pink: TREP)’s first quarter net income of $697,000 is greater than its market cap of $628,277. This is an obvious sign of a valuation disparity that shows Trucept, Inc. (OTC Pink: TREP) is believed to be undervalued. To be sure, the company continues to work through some debt and liabilities, but with positive cash flows and continued revenue growth, management should be able to clean up a majority of the balance sheet by the end of 2016. In addition, factoring in management’s full year 2016 outlook of $60 million revenue and $2 million net income, Trucept, Inc. (OTC Pink: TREP) could see its market cap storm around the mid single-digit millions of dollars, if the company is able to reach its target.
Comparing Trucept, Inc. (OTC Pink: TREP)’s valuation relative to its five peers above, the valuation disparity only grows. Looking at the company’s closest competitor in market cap, Fortune Industries, Inc. (OTC Pink: FDVF), the company has a valuation of over $16 million and had full year 2015 revenue of $62.12 million. This shows that if management can hit their target of $60 million in revenue and $2 million net income for full year 2016, Trucept, Inc. (OTC Pink: TREP) could see its market cap vastly expand from currently levels.
The bottom line here is that Trucept, Inc. (OTC Pink: TREP) continues to show promising growth prospects throughout the rest of 2016, and certainly more so beyond this year. With the launch of the company’s unique, Uber-like app for on demand temporary staffing, Trucept, Inc. (OTC Pink: TREP) stands make a strong impression on a high-growth industry. Not to mention the continuing trend of businesses looking to cut costs and outsource HR management will help the company continue to expand its PEO business. In addition, when considering the lack of proper valuation relative to first quarter 2016 earnings and peers, Trucept, Inc. (OTC Pink: TREP) appears to be a little known gem in the market.