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  Still sticking with Analysts

BENJ GALLANDER and BEN STADELMANN

Thursday, May 24, 2007

Back in February 2005, the title of our article was, "In for the long haul with Analysts." Unfortunately, we are still hauling, but at a much lower price point.

Purchased in January 2004 at $2.92 (U.S.), Analysts International appeared to reward our faith that autumn as it jumped over $4.60. After drooping, it rallied back to the $4 mark on a proposed merger with Computer Horizons.

While our company's shareholders voted overwhelmingly in favour of conjoining, a prominent Horizons shareholder derailed the deal, and ANLY's stock price plummeted faster than the Blue Jays' playoff aspirations. Being contrarians, that encouraged us to better than double our position at $2.36. Alas, it currently wallows around $1.85.

The numbers on this IT consulting and staffing outfit look mighty good, even after two years of losses and a 2007 that also began in the red. The balance sheet has only a limited amount of debt, the stock trades at less than book value and revenues are trending upward above $350 million.

However, there are some caveats attached to this company. CEO/president Jeffrey Baker planned over the past year to restore operations to profitability, push the stock back to the $3 level and unload the company at a premium. He didn't come close, and when the going got tough he promptly departed for the bohemian paradise of "other interests." The number of top brass who parachute to that world during difficult times is staggering.

Michael Lavelle, who has been with the firm since 1989, is filling Baker's roles on an interim basis, reassuming positions he previously held. So he is experienced on the leadership throne and evidently confident enough in the future to recently purchase shares at between $1.76 and $1.80. While he probably isn't dreaming that the stock will again trade above $30, he is certainly pursuing a reasonable return on his investment.

We think he'll realize that goal. Though Analysts' sector is crowded with competitors and the enterprise is a relative minnow compared to Adecco, Ciber and their ilk, the firm has a reasonable niche and skilled management and has shown staying power through difficult times.

Even though Analysts has been one of the losers, knocking our annualized five-year return down to 29 percent, we"re mighty confident that it will plump our numbers going forward. Our initial sell target is $10.84. Yep, we"ll continue to remain with Analysts for the long haul, if necessary.


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