This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

July 24, 2009 - Startek, Inc. (SRT-NYSE) together with its subsidiaries, provides business process outsourcing services to the communications industry in the United States, Canada, and the Philippines. The company's service offerings include customer care, which includes management of customer acquisition, service activation, renewals, account inquiries, complaint resolutions, product information, and billing support; sales support that comprises cross-selling and up-selling its clients' products, implement product promotion programs, secure and process additional customer orders, and handle inquiries related to product shipments and billing; and complex order processing services, which include order management and technical sales support for various communications services, such as wireline, wireless, data, and customer premise equipment.

Startek lost money in 2007 and 2008, to the tune of 18 cents a share, then 64 cents a share. But now it looks like business has turned around and analysts predict this year will show a profit of 37 cents and for 2010, 63 cents a share. Next earnings will be released on July 28 for the second quarter results. Consensus estimate is for 7 cents a share, up from a loss of 31 cents in the same quarter last year. Next quarter estimates are for 11 cents a share, well above the negative 7 cents a share in the same quarter last year. Increased profitability will most likely come from newly opened, lower-cost offshore expansion, new contract wins, and more contract renewals.

With losses for 2 years, you wouldn't expect the stock to have done too well. You'd be right. The price went from $9.10 to $2.10 in the latter part of last year, rallied, then dropped back to $2.20 before taking off and getting back to $9.10 recently. That's a gain of over 300% in a matter of a few months. Clearly, investors believe analysts' expectations and are expecting a return to profitability this year and next as well as good growth in sales in the future.

Look for more expansion next year as the company has improved its cash position in anticipation of opening new call centers, enhancing its service offerings and more infrastructure spending. With new call centers, there will be start-up costs that will hurt the bottom line for a few quarters. The company recently announced a new credit facility with UMB Bank Colorado for $15 million which replaces a $10 million facility with Wells Fargo Bank. There is currently about $28 million in cash at the company.

More numbers: Price to sales is .46. Price to Book is 1.18. Book Value is $7.34. Total debt is $5.88 million. Current ratio is 3.03. Total cash per share is $1.89. Beta is 2.08. Total shares outstanding are 14.83 million. The float is 11.74 million shares. Insiders own 20.61% while institutions have 62.50%. There is no dividend.

Dig deeper into Startek, especially if you think the economy will recover soon. Outsourcing should only increase as companies loosen thier purse strings to buy services that are cheaper bought than done in house. This small stock is extremely volatile and should be of interest to aggressive investors who like a good turnaround story. Keep in mind that 2 clients represent 85% of sales. If one of them doesn't renew a contract, it will definitely hurt, big time. Of course, with new expansion plans, the company is working to diversify its revenue base.

Company Web site: www.startek.com

- Ted Allrich