3 Stocks Driving The Diversified Services Industry Higher

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 94 points (0.6%) at 16,903 as of Wednesday, June 18, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 1,336 issues advancing vs. 1,652 declining with 168 unchanged.

The Diversified Services industry as a whole closed the day up 0.3% versus the S&P 500, which was up 0.7%. Top gainers within the Diversified Services industry included PDI ( PDII), up 2.5%, Essex Rental ( ESSX), up 6.1%, Internet Patents ( PTNT), up 2.9%, RCM Technologies ( RCMT), up 1.5% and Hudson Global ( HSON), up 3.1%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

RCM Technologies ( RCMT) is one of the companies that pushed the Diversified Services industry higher today. RCM Technologies was up $0.10 (1.5%) to $6.68 on average volume. Throughout the day, 9,643 shares of RCM Technologies exchanged hands as compared to its average daily volume of 12,000 shares. The stock ranged in a price between $6.50-$6.68 after having opened the day at $6.57 as compared to the previous trading day's close of $6.58.

RCM Technologies, Inc. designs, develops, and delivers business and technology solutions to commercial and government sectors in the United States, Canada, and Puerto Rico. The company operates in three segments: Engineering, Information Technology, and Specialty Health Care Services. RCM Technologies has a market cap of $82.0 million and is part of the services sector. Shares are down 5.7% year-to-date as of the close of trading on Tuesday. Currently there are no analysts who rate RCM Technologies a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates RCM Technologies as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from TheStreet Ratings analysis on RCMT go as follows:

  • RCMT's revenue growth has slightly outpaced the industry average of 11.9%. Since the same quarter one year prior, revenues rose by 17.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • RCMT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.73, which clearly demonstrates the ability to cover short-term cash needs.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • RCM TECHNOLOGIES INC has improved earnings per share by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, RCM TECHNOLOGIES INC reported lower earnings of $0.16 versus $0.26 in the prior year.

You can view the full analysis from the report here: RCM Technologies Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Essex Rental ( ESSX) was up $0.16 (6.1%) to $2.80 on light volume. Throughout the day, 2,145 shares of Essex Rental exchanged hands as compared to its average daily volume of 28,200 shares. The stock ranged in a price between $2.80-$2.87 after having opened the day at $2.87 as compared to the previous trading day's close of $2.64.

Essex Rental Corp., through its subsidiaries, rents and distributes lifting equipment to the construction industry in North America. The company operates in three segments: Equipment Rentals, Equipment Distribution, and Parts and Service. Essex Rental has a market cap of $65.7 million and is part of the services sector. Shares are down 19.0% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Essex Rental a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Essex Rental as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on ESSX go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Trading Companies & Distributors industry. The net income has significantly decreased by 46.5% when compared to the same quarter one year ago, falling from -$2.16 million to -$3.17 million.
  • The debt-to-equity ratio is very high at 3.31 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ESSX maintains a poor quick ratio of 0.93, which illustrates the inability to avoid short-term cash problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Trading Companies & Distributors industry and the overall market, ESSEX RENTAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 44.44% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ESSX, with its decline in revenue, underperformed when compared the industry average of 2.5%. Since the same quarter one year prior, revenues fell by 15.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

You can view the full analysis from the report here: Essex Rental Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

PDI ( PDII) was another company that pushed the Diversified Services industry higher today. PDI was up $0.10 (2.5%) to $4.15 on heavy volume. Throughout the day, 20,545 shares of PDI exchanged hands as compared to its average daily volume of 9,500 shares. The stock ranged in a price between $4.08-$4.30 after having opened the day at $4.13 as compared to the previous trading day's close of $4.05.

PDI, Inc. provides outsourced commercial services to pharmaceutical, biotechnology, and healthcare companies in the United States. PDI has a market cap of $62.4 million and is part of the services sector. Shares are down 15.4% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates PDI a buy, no analysts rate it a sell, and 1 rates it a hold.

TheStreet Ratings rates PDI as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow and feeble growth in its earnings per share.

Highlights from TheStreet Ratings analysis on PDII go as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry. The net income has significantly decreased by 175.8% when compared to the same quarter one year ago, falling from $2.13 million to -$1.61 million.
  • The gross profit margin for PDI INC is rather low; currently it is at 16.98%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.91% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$6.46 million or 628.88% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • PDI INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PDI INC continued to lose money by earning -$0.31 versus -$1.75 in the prior year. For the next year, the market is expecting a contraction of 35.5% in earnings (-$0.42 versus -$0.31).
  • In its most recent trading session, PDII has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

You can view the full analysis from the report here: PDI Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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