If You Buy Economic Recovery, Then Buy Monster Worldwide

Dec.13.12 | About: Monster Worldwide, (MWW)

Introduction

Monster Worldwide (NYSE:MWW) is an employment services company. It helps the average job seeker find employment opportunities. The company has an exceptional future ahead.

Qualitative Analysis

Monster Worldwide operates in three reportable segments: Careers - North America, Careers - International, and Internet Advertising & Fees. North America represented 47%, International represented 43%, and Internet Advertising & Fees represents 10% of consolidated revenue.

The revenue model is simple. Monster Worldwide provides searchable job postings and resume database access. Job seekers search the postings, and post their resumes on Monster Worldwide's network of websites. The employer pays for advertising their company on the website, searching the resume database, and utilizes career site hosting and other services such as recruitment media. Monster Worldwide generates revenue from the employers, while providing the data base for free to job seekers.

Technical Analysis

Monster Worldwide has been on a continuous down-trend for quite a while; however, I anticipate the stock to recover on favorable sentiment, and this is because the stock broke above the long-run diagonal trend line.

I anticipate limited downside; there's not much lower the stock can really go, and analysts on a consensus basis have a strong growth and price forecast going forward. Only way is up.

Click to enlarge

(Chart from freestockchart.com)

Monster Worldwide broke and remains above the 20-day Moving Average on moderate volume.

Notable support is $5.00 per share.

Notable resistance is $6.75, $8.50, and $9.00 per share.

I anticipate the stock to rally anywhere from $8.00 - $9.00 per share. The downside is extremely limited while upside is extremely large (further discussion under strategy).

Street Assessment

Analysts on a consensus basis have strong expectations for the company going forward.

Growth Est

MWW

Industry

Sector

S&P 500

Current Qtr.

-27.30%

221.70%

10.00%

8.50%

Next Qtr.

14.30%

N/A

6.90%

14.80%

This Year

-16.20%

49.70%

6.20%

5.50%

Next Year

48.40%

25.00%

4.20%

13.20%

Past 5 Years (per annum)

-29.30%

N/A

N/A

N/A

Next 5 Years (per annum)

17.00%

16.22%

14.06%

9.19%

Price/Earnings (avg. for comparison categories)

18.48

31.92

-20.95

17.89

PEG Ratio (avg. for comparison categories)

1.09

2.31

0.2

0.33

Click to enlarge

(Table and data from yahoo finance)

The company shows great potential as analysts on a consensus basis have a 5-year average growth rate forecast of 17% (based on the above table).

Earnings History

11-Dec

12-Mar

12-Jun

12-Sep

12-Sep

EPS Est

0.12

0.02

0.06

0.05

0.05

EPS Actual

0.11

0.07

0.06

0.09

0.09

Difference

-0.01

0.05

0

0.04

0.04

Surprise %

-8.30%

250.00%

0.00%

80.00%

80.00%

Click to enlarge

(Table and data from yahoo finance)

The average surprise percentage is 80% above analyst forecasted earnings over the past four quarters (based on above table).

Forecast and History

EPS History and Price History

Year

Basic EPS

P/E Multiple

2007

$ 1.14

28.42

2008

$ 1.04

11.63

2009

$ 0.16

108.75

2010

$ (0.27)

-87.52

2011

$ 0.43

18.44

Click to enlarge

(Table created by Alex Cho, data from shareholder annual report, and price history is from yahoo finance)

The EPS figure shows that throughout the 2007-2010 period, revenue growth slowed as the company was adversely affected by the great recession. Once the United States economy exited the recession in 2010-2011, the company's earnings started to improve; unemployment growth lags behind GDP growth in a recovery.

Click to enlarge

(Table created by Alex Cho, data from shareholder annual report)

By observing the chart, we can conclude that the business is cyclical and is affected by macroeconomics. Therefore, the largest risk factor for Monster Worldwide is the slowing of international gross domestic product growth. So as long as the world economy continues to grow and unemployment shrinks, the company will generate outstanding returns over a 5-year time span based on the forecast below.

Click to enlarge

(Forecast and table by Alex Cho)

By 2016, I anticipate the company to generate $1.71 in earnings per share. This is because of its past growth trend, improving global outlook, and the continued success of its product offerings. The forecast is proprietary, and below is a non-linear chart indicating the price of the stock over the next five years.

Click to enlarge

(Forecast and chart by Alex Cho)

Investment Strategy

MWW closed at $5.77 on December 12th, and although the holiday season is coming to a close, I remain optimistic. I have a price forecast of $8.70 for 2012, being that there are only 18-days before the end of 2012. It may not necessarily hit that price target due to the short time frame. Which means we should move to the long-run, and focus on 2012-2013. In 1st quarter 2013, Monster Worldwide will announce earnings for 4th quarter 2012. Up until the earnings are announced, the stock should experience a strong run-up. I anticipate the stock to trade at around $8.70 - $11.37 implying a lot of upside going forward.

Short Term

Over the next couple of months, the stock is likely to appreciate from $5.77 to $8.70-$11.37. This implies 50.78%-97% upside from current levels. The technical chart readings imply weakness in recent price action; however, the stock is likely to break the upper channel (refer to price chart earlier in the article), and continue to trend higher. Therefore, both the forecast model for fundamentals and the market sentiment incline me to recommend a buy at $5.77 and to sell at $8.70-$11.37 per share. There is notable resistance at $6.75, $8.50, and $9.00 per share. It is likely that the stock will experience minor pull backs at each level throughout the 2012-2013 periods.

Over a short time frame, I recommend selling the stock beyond $9.00 per share to pocket short-term gains in 2013.

Long Term

The company is a great investment, I anticipate MWW to deliver upon the price and earnings forecast despite the risk factors (global economic slowdown). The company's primary upside catalyst is international growth. I anticipate the company to deliver upon my forecasted price target of $25.36 by 2016. This implies a return of 339.50% by 2016.

Conclusion

Monster Worldwide is a great investment opportunity. The growth forecast along with strong market sentiment reinforces my optimism in this large-cap stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.