Key Stats for ManpowerGroup Inc.
We looked at Robert Half nine months ago, so how about the behemoth of employment services?
| Ticker | MAN |
|---|---|
| Sector | Employment Services |
| Latest price | $103.78 |
| Value | $7,020M |
| Daily vol | $66M |
| Date | 08 May 2017 |
Useful Links
- Latest news from Yahoo Finance
- Latest results from SEC Edgar
- Website: manpowergroup.com
Description
ManpowerGroup Inc. is a provider of workforce solutions and services. That means permanent, temporary and contract recruitment, assessment and selection, training and outsourcing. Plus under their Experis brand, they offer an information technology (IT), engineering and finance service.
To me what's surprising is how important Europe is:
| 2016 | Revenues | Operating Profit |
|---|---|---|
| Americas | $4.3bn | $0.2bn |
| Northern Europe | $5.1bn | $0.4bn |
| Southern Europe | $7.5bn | $0.2bn |
| Asia-Pac & Other | $2.7bn | $0.1bn |
In terms of the industry, clearly it's driven by the overall economy, i.e. pro-cyclical...
Improving economic growth typically results in increasing demand for labor, resulting in greater demand for our staffing services while demand for our outplacement services typically declines. Correspondingly, during periods of weak economic growth or economic contraction, the demand for our staffing services typically declines, while demand for our outplacement services typically accelerates.
... but they say there is a trend that helps them on top:
During the last several years, secular trends toward greater workforce flexibility have had a favorable impact on demand for our innovative workforce solutions and services around the world. As companies attempt to increase the variability of their cost base, the workforce solutions we provide help them to effectively address the fluctuating demand for their products or services.
Recent financials
So what do the numbers look like? Well the strong dollar didn't help, but even so they grow the top line, increased margins and saw a nice jump in earnings. Hard to find compliant here!
| Metric | 2016A | 2015A | 2014A | 2013A | 2012A |
|---|---|---|---|---|---|
| Revenue | $19.7bn | $19.3bn | $20.8bn | $20.3bn | $20.7bn |
| EPS | $6.27 | $5.40 | $5.30 | $3.62 | $2.47 |
Competition
As far as I can tell, the competition comes from 2 big European companies. Though the Internet has to be a issue as startups look at ways to gain market share in what's a fragmented and often, hyper local business.
Our industry is large and fragmented, comprised of thousands of firms employing millions of people and generating billions of United States dollars in annual revenues. It is also a highly competitive industry, reflecting several trends in the global marketplace, notably increasing demand for skilled people and consolidation among clients and in the employment services industry itself.
Looking at 51job you can see the benefits of an online offering. And with RHI and KFY the joys of being at the high-end of the recruitment market.
That said, margins and returns aren't horrible compared to Adecco or Randstad. Though maybe, maybe there's room for improvement?
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| ManpowerGroup Inc. | $19,824M | 4% | 18% |
| Robert Half International Inc. | $5,235M | 12% | N/A |
| On Assignment, Inc. | $2,485M | 10% | N/A |
| 51job, Inc. (ADR) | $339M | 26% | 12% |
| Korn/Ferry International | $1,619M | 12% | 6% |
| Kelly Services, Inc. | $5,277M | 2% | 12% |
| Resources Connection, Inc. | $587M | 8% | 8% |
| The Europeans | |||
| Adecco Group AG | CHF24,638M | 5% | 21% |
| Randstad Holding NV | €20,684M | 5% | 14% |
Cash / Debt?
ManpowerGroup has $109M of net debt. That is 0.1x it's latest operating profit. So nothing to worry about here. In fact, this is one of those industries that I'd prefer to see a very low low debt figure, in case the economic cycle changes.
Wall Street thinks?
The professionals on Wall Street have a $107.73 for ManpowerGroup and their recommendation is Buy. That implies an upside of 4% to their target.
Valuation
The following table shows the key valuation metrics. The valuation doesn't look aggressive at 16x, though note it's traded between 10x and 19x in the last two years. So clearly not a value play, but doesn't feel like it's expensive.
| Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| MAN | $7,020M | 16x | 8% | 2% | 9% |
| RHI | $5,968M | 18x | 8% | 2% | N/A |
| ASGN.K | $2,718M | 18x | 10% | 0% | N/A |
| JOBS.O | $2,550M | 21x | N/A | 0% | N/A |
| KFY | $1,863M | 14x | 12% | 0% | 7% |
| KELYA.O | $836M | 14x | N/A | 0% | N/A |
| RECN.O | $400M | 19x | N/A | 3% | 9% |
| The Europeans | |||||
| ADEN.S | CHF12,893M | 14x | 6% | 3% | 10% |
| RAND.AS | €10,271M | 13x | 4% | 4% | 10% |
Dividends
ManpowerGroup is forecast to pay a dividend of $1.81 per share, compared with a historic dividend of $1.72 per share. That is a 5% growth. The forecast dividend of $1.81 compares to a forecast EPS of $6.57. i.e. plenty of room to increase or do buybacks.
On that note: they did $500m of buybacks in 2016 after $600m in 2015. So not shy to return capital to shareholders.
Catalysts
The price targets, sales forecasts and earnings forecasts have been on the rise since August. In the last 3 months the stock price has moved by 6% that compares with little change in the earnings forecasts. At the latest results, revenue grew 4%.
On the management team's latest call with Wall Street brokers, they said:
Economic and labor market outlook in many parts of the world has improved slightly, also finally in Europe, where we have the majority of our operations.
Nice, to see, eh? The net effect is the following forecasts.
| Metric | 2016A | 2017E | 2018E |
|---|---|---|---|
| Revenue | $19.7bn | $20.1bn | $21.0bn |
| EPS | $6.27 | $6.57 | $7.22 |
Less than 10% growth at the bottom line, but maybe that ignores their ability to juice EPS with buyback?
Well?
The fundamentals are going the right way, the global economy looks like it's helping, even in countries that have disappointed for years. There's no sign of a significant online disrupter, and the cashflows are coming back to shareholders.
Solid, yes. But for some reason, I just don't love this stock. In the pro-cyclical industrial segment, my hunch is there are more attractive options elsewhere. Plus I don't see the "moat" to the business, as Randstad, Manpower and Adecco look as differentiated as Verizon from AT&T. The brand, existing contracts and bricks-and-mortar presence have to have value, but with a 4% margin, I can't fall in love. Harsh perhaps?
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Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted May 08, 2017 at 10:30AM by shane_stockflare http://ift.tt/2pTJ16D
