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5 Reasons Why You Should Hold onto ManpowerGroup Stock

Zacks

Since Nov 8, 2016, the Staffing industry has seen a healthy rise of 26.6% to date, while the S&P 500 gained 12.1%. This is primarily attributable to the proposed pro-growth policies of President Donald Trump.

ManpowerGroup Inc. MAN is the global leader in the employment services industry and has a well-established network of 2,900 offices in 80 countries. The company offers its services to approximately 400,000 clients, including small and medium sized enterprises across all industries as well as the world's largest multinational corporations. ManpowerGroup is likely to benefit from the new policies, as more hiring is in the cards. The company also expects to experience income growth across all its segments.

Sales/Assets Ratio

The sales/asset ratio is often overlooked by investors, but it can be an important indicator in growth investing nonetheless. Currently, the company has a S/TA ratio of 2.58 which means that it gets $2.58 in sales for each dollar in assets. Comparing this to the industry average ratio of 2.44, we can say that ManpowerGroup is a bit more efficient than the industry at large. The company currently projects sales growth this year of 5.68% as against the industry average of 0.19% decline.


P/S Ratio

Another key metric is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Right now, ManpowerGroup has a P/S ratio of about 0.35. This is a bit lower than the industry average of 0.50.

Earnings Estimate Revisions

In addition to the favorable metrics outlined above, investors should also consider the positive trends that we are seeing on the analyst estimate revision front. Analysts have been raising their estimates for ManpowerGroup lately, and now the earnings picture is looking favorable for the company.

The company has outperformed the Zacks categorized Staffing Firms industry with an average return of 6.5% compared with 1.3% gain for the latter, over the last 90 days. Over the same period, the consensus estimate for the current quarter jumped from $1.69 to $1.71 today.

Strong Financial Performance in First Quarter

ManpowerGroup reported mixed first-quarter 2017 results. Quarterly adjusted earnings fell short of the Zacks Consensus Estimate by 1.8%, but revenues surpassed the same by 1.4%.

Quarterly adjusted earnings came in at $1.09 per share, up 11.2% year over year. However, the bottom line missed the Zacks Consensus Estimate of $1.11. The company noted that restructuring expenses hurt quarterly earnings by nearly 30 cents per share. However, a lower income tax rate benefited the same by roughly 20 cents per share. Notably, ManpowerGroup stated that a strong U.S. dollar (relative to other currencies) also weighed over the company’s quarterly earnings by 3 cents per share in the quarter.

Revenues during the first quarter came in at $4,757.2 million, up 3.7% year over year. The top line also exceeded the Zacks Consensus Estimate of $4,690 million.

ManpowerGroup believes that its European business would strengthen in the quarters ahead. The company is poised to grow on the back of productive workforce and sound restructuring initiatives. However, adverse foreign currency translation impact is expected to hamper near-term results.

The company anticipates earnings in the range of $1.67–$1.75 per share in second-quarter 2017. The guidance includes the predicted negative currency impact of 8 cents per share, but excludes the effect of restructuring charges.

Growth Drivers

ManpowerGroup is continuously making significant investments to expand permanent recruitment solutions offerings. Management continues to believe that global recovery is on track but at a slow and uneven pace. As a result, it is focusing on internal drivers like disciplined pricing and tough control on productivity to ensure uninterrupted profitability.

ManpowerGroup believes that its European business would strengthen in the quarters ahead. The company is poised to grow on the back of productive workforce and sound restructuring initiatives. It remains a good bet for growth and yield-seeking investors. The company is likely to benefit through its cost recalibration and simplification plan.

Bottom Line

In aggregate, ManpowerGroup currently has a Zacks VGM Score of ‘A’. This, along with some other key metrics makes the company a solid choice for investors. However, the company currently carries a Zacks Rank #3 (Hold). Investors should hold onto the stock at present as we are anticipating brighter days ahead for the company.

Stocks to Consider

Some better-ranked stocks in the industry include BG Staffing, Inc. BGSF, Randstad Holding NV RANJY and DLH Holdings Corp. DLHC. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BG Staffing is currently trading at a forward P/E of 15.5%.

Randstad has a long-term earnings growth expectation of 8% and is currently trading at a forward P/E of 13.5x.

DLH Holdings is currently trading at a forward P/E of 16.24x.

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