People Corporation only for those with an appetite for risk

Aug 26th, 2013 – 1 Comment

Given the risk factors mentioned earlier I would be cautious when considering PEO.


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Hello Lou,

I was curious about your thoughts for the People Corporation. It looks like they made a bunch of acquisitions and the stock price shot up accordingly.

Regards,
Jeff

 

Hey Jeff,

Thanks for the assignment. People Corporation (PEO TSXV) is a micro-cap company providing group benefits, group retirement, and human resource services. There are a number of factors that I generally consider when I examine a stock like PEO.  The first is market capitalization. The company has a market capitalization of $40.55 million which implies higher risk given that others organizations with greater resources have an advantage when it comes to competition in the sector.

The second thing to check is the market where the stock trades. The Venture exchange has less stringent reporting requirements than a more senior exchange which again adds another layer of risk that needs to be considered.

In addition the stock has no coverage from analysts employed by capital markets firms which means that there is less momentum coming from the advisor channel. There has also been little news coverage of corporate action which keeps the demand for the stock within a tight group.

Finally there is the question of liquidity. The average daily volume over the last three months is 37,292 shares a day. Over the last month the stock has traded above average volume on only 14 days. The higher the average daily volume the better the opportunity to buy and sell shares without an inordinate movement in the price.

A review of the charts will add further depth to the evaluation of PEO.

 

 

 

PEO

The three- year chart indicates that the stock started moving in December of 2012 when it broke above resistance at $0.39. The move higher was prompted by the release of year end results with revenue growth of 11.2%. The stock built a base at $0.60 through April of 2013 and then made another move higher in July of 2013 on the acquisition of Hamilton+ Partners for $13.9 million.

 

 

 

 

 

PEO2

The six-month chart tells the tale of a stock that is building a base at $1.15. Given the risk factors mentioned earlier I would be cautious when considering PEO. The stock has had a good run and I would imagine some investors who got on early must be capturing their profits.

Make it a profitable day and happy capitalism!

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