Barrett has gotten torched over the last six months - since October 2025, its stock price has dropped 34.3% to $29.23 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is now the time to buy BBSI? Find out in our full research report, it’s free.
Why Does Barrett Spark Debate?
Operating as a professional employer organization (PEO) that serves over 8,000 companies with more than 120,000 worksite employees, Barrett Business Services (NASDAQ: BBSI) provides management solutions that help small and mid-sized businesses handle human resources, payroll, workers' compensation, and other administrative functions.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Strong Momentum
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Barrett’s sales grew at a solid 7.1% compounded annual growth rate over the last five years. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Barrett’s margin expanded by 6.1 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat. Barrett’s free cash flow margin for the trailing 12 months was 3.8%.
One Reason to be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Barrett’s ROIC has unfortunately decreased significantly. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
Barrett’s merits more than compensate for its flaws. After the recent drawdown, the stock trades at 16× forward P/E (or $29.23 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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