Jacobs Solutions (NYSE:J) versus Barrett Business Services (NASDAQ:BBSI) Critical Review

Barrett Business Services (NASDAQ:BBSI) and Jacobs Solutions (NYSE:J) are both industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, profitability, risk, institutional ownership, analyst recommendations, earnings and dividends.

Insider and Institutional Ownership

86.8% of Barrett Business Services shares are held by institutional investors. Comparatively, 85.7% of Jacobs Solutions shares are held by institutional investors. 4.8% of Barrett Business Services shares are held by company insiders. Comparatively, 0.5% of Jacobs Solutions shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Barrett Business Services has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Jacobs Solutions has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Dividends

Barrett Business Services pays an annual dividend of $0.32 per share and has a dividend yield of 1.0%. Jacobs Solutions pays an annual dividend of $1.44 per share and has a dividend yield of 1.0%. Barrett Business Services pays out 23.5% of its earnings in the form of a dividend. Jacobs Solutions pays out 51.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Barrett Business Services has increased its dividend for 1 consecutive years and Jacobs Solutions has increased its dividend for 4 consecutive years. Jacobs Solutions is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Barrett Business Services and Jacobs Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Barrett Business Services	2.77%	20.95%	6.11%
Jacobs Solutions	2.40%	23.96%	7.02%

Analyst Recommendations

This is a summary of current ratings and price targets for Barrett Business Services and Jacobs Solutions, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Barrett Business Services	0	3	2	1	2.67
Jacobs Solutions	0	6	6	0	2.50

Barrett Business Services presently has a consensus price target of $41.00, indicating a potential upside of 25.96%. Jacobs Solutions has a consensus price target of $156.40, indicating a potential upside of 10.99%. Given Barrett Business Services’ stronger consensus rating and higher probable upside, research analysts plainly believe Barrett Business Services is more favorable than Jacobs Solutions.

Valuation & Earnings

This table compares Barrett Business Services and Jacobs Solutions”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Barrett Business Services	$1.24 billion	0.64	$54.45 million	$1.36	23.93
Jacobs Solutions	$14.22 billion	1.17	$289.34 million	$2.82	49.97

Jacobs Solutions has higher revenue and earnings than Barrett Business Services. Barrett Business Services is trading at a lower price-to-earnings ratio than Jacobs Solutions, indicating that it is currently the more affordable of the two stocks.

Summary

Jacobs Solutions beats Barrett Business Services on 10 of the 18 factors compared between the two stocks.

About Barrett Business Services

Barrett Business Services, Inc. provides business management solutions for small and mid-sized companies in the United States. The company develops a management platform that integrates a knowledge-based approach from the management consulting industry with tools from the human resource outsourcing industry. It offers professional employer services under which it enters into a client services agreement to establish a co-employment relationship with each client company, assuming responsibility for payroll, payroll taxes, workers compensation coverage, and other administration functions for the client’s existing workforce. The company provides staffing and recruiting services, such as on-demand or short-term staffing assignment, contract staffing, direct placement, and long-term or indefinite-term on-site management services. It serves electronics manufacturers, light-manufacturing industries, agriculture-based companies, transportation and shipping enterprises, food processors, telecommunications companies, public utilities, general contractors in various construction-related fields, restaurant franchises, and professional services firms. Barrett Business Services, Inc. was incorporated in 1965 and is headquartered in Vancouver, Washington.

About Jacobs Solutions

Jacobs Solutions Inc. provides consulting, technical, engineering, scientific, and project delivery services for the government and private sectors in the United States, Europe, Canada, India, Asia, Australia, New Zealand, the Middle East, and Africa. It operates through Critical Mission Solutions, People & Places Solutions, Divergent Solutions, and PA Consulting segments. The company offers cyber, data analytics, systems and software application integration and consulting, enterprise level and mission IT, design, nuclear, and enterprise level operations and maintenance services; software development, testing, mission integration, program management, research, development, test, evaluation services, training, and environmental remediation services; and other technical consulting solutions, as well as construction and construction management services. It also provides consulting services for consumer and manufacturing, defense and security, energy and utilities, financial services, government, health and life sciences, and transport industries. The company was founded in 1947 and is headquartered in Dallas, Texas.