On the news of jobless claims achieving their nadir, at least since April 2008 anyway, my thoughts turn to companies that may see something of a bounce as a result. While I have my doubts 4000 fewer souls seeking unemployment benefits can favorably impact an entire industry, I will concede the unquantifiable psychological factors that influence our markets are frequently less than rational. That said, I’m going to walk you through 5 companies which may benefit, in whole or in part, from the happy news. From a value investor paradigm, I will offer my opinion on the prudence of including them in your investment strategy.
Let’s begin with the poster child of the industry, Monster Worldwide, Inc. (MWW). This small cap ($971.13 million) is trading at about $7.89 per share which translates to 23.07 times earnings. The price/earnings growth ratio is 1.16. Return on equity is anemic at 3.74%. MWW’s price to book is a fractional 0.81. Year over year quarterly revenue growth is 13.20% and earnings growth is non-existent. Monster’s financial strength looks decent with debt equity and current ratios of 18.60 and 0.95 respectively. A word of caution…Monster’s balance sheet carries $1.22 billion in goodwill which creates a favorable distortion in the current ratio.
Monster has probably received one of the worst ‘beat-downs’ the staffing industry has ever experienced. In a time of record unemployment, one might think that anCa enterprise that exists for the purpose of matching people to employers would be booming. The sad reality is there just were too few jobs available. No job match, no revenue! Monster owners saw a percentage change in shareholder value of -69.54% from its 52 week high of $25.90. Then along comes LinkedIn Corporation (LNKD), an established social networking site with a business and professional bent, and begins offering employment services and diminishes Monster’s market share. I’ll take a look at it next. As for Monster as an investment, I’ll have to pass. There are but 2 ways to come out on top with this stock, a.) if the rumors of acquisition by a private equity firm come to pass or b.) Monster’s loose alliance with Facebook bears fruit.
LinkedIn Corporation is a mid cap ($6.23 billion) trading at about $63.90 per share. Its trailing twelve month price/earnings ratio is 875.34 with a price/earnings growth ratio of 2.54. Return on equity is a lackluster 3.96%. The price to book is predictably outrageous at 15.20. Year over year quarterly revenue growth is 125.70% and earnings growth is non-existent. LinkedIn’s financial strength is difficult to judge with a non-existent debt equity ratio, but the current ratio of 2.66 sends a positive signal. LinkedIn does not technically belong in this group, but I felt that its obvious venture into the staffing game required that we take a look. It is, as I’m sure you know, a recent IPO, insufficiently vetted for any value investor to entertain. By any measure, this company doesn’t blow my skirt up.
ManpowerGroup (MAN) is a mid cap ($2.94 billion) trading at about $36.09 per share. There is no price/earnings ratio and the price/earnings growth ratio is 0.76. Price to book is 1.16. Manpower’s return on equity is in the negative at -6.14%. Quarterly year over year revenue growth is 16.30% and quarterly year over year earnings growth is 55.20%. The debt/equity ratio is solid at 27.85 as is the current ratio at 1.32. I’m also unimpressed with the nearly $1 billion in goodwill on the balance sheet although I must say that management seems to be gradually reducing it from previously higher levels. ManpowerGroup’s share price has declined -48.20 as a percentage change from its 52 week high of $69.67. Not as steep as the decline of MWW, but a deep cut none-the-less. I’m sure you won’t be shocked to learn that I harbor no plans to add this filly to my stable.
Kelly Services (KELYA) is a small cap ($509.93 million) trading at $13.85 which is just 9.60 times trailing twelve month earnings. Kelly boasts a favorable price/earnings growth ratio of 0.58 as well. Equally pleasing is the fractional price to book of 0.78. Bazzinga! Value stock! Return on equity is not terribly impressive at 8.76% but quarterly year-over-year revenue growth is at least in positive territory at 9.70%, as is quarterly year-over-year earnings growth at 105.20%. The debt/equity ratio is moderately corrupted by $67.3 million in goodwill but at a modest 12.02 and a better than average current ratio of 1.61. The company has weathered the storm better than Monster, and better than ManpowerGroup, experiencing a -39.49% change in share value from its 52 week high of $22.89. More to the point, Kelly’s financial strength has weathered the trials better than its price would indicate. I’m on board with this company. I have to say KELYA, helya!
Robert Half International Inc. (RHI), the Saks Fifth Avenue of the group, in terms of clientele, is a mid cap ($4.05 billion) trading at $28.34 which is 31.04 times trailing twelve month earnings. RHI’s price/earnings growth ratio is an impressive 0.93. Price to book is rather off-putting at 5.11. Return on equity is the best we’ve seen in the group today at 16.09%. Quarterly year-over-year revenue growth is well into positive territory at 20.50%, as is quarterly year-over-year earnings growth at 114.20%. The debt/equity ratio is fractional at just 0.21 and the current ratio is almost as impressive at 2.08. The balance sheet is also tainted with a dose of goodwill ($189.79 million), but much less so than others mentioned here. It has held up shareholder value quite well, reflecting a modest decline of 17.28 as percentage change from its 52 week high of $34.26. I like what I see here, and suppressing my revulsion for the high price/earnings ratio and price to book, add this to my portfolio…with big teeth.