A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we focus on ManpowerGroup Inc. MAN, which has expected earnings per share (EPS) growth rate of 23.3% for 2018 and a VGM Score of B. It has a long-term (three to five years) EPS growth rate of 8.5%.
Factors That Bode Well forManpowerGroup
The staffing industry is currently benefiting from a strong economy, leading to robust manufacturing and non-manufacturing activities and higher corporate spending post the tax reform. So, there is plenty of room for growth for ManpowerGroup in the United States in the near to mid-term as the demand environment stays strong. Also, there are ample opportunities for the company in emerging markets as penetration rates are still well below global standards.
To increase productivity and efficiency and reduce cost, the company is making significant investments in restructuring and technology. In the third quarter, ManpowerGroup transitioned a major portion of its business in Germany to a new integrated front office system. The company is also upgrading its business with cloud-based front office systems.
ManpowerGroup Inc. Revenue (TTM)
ManpowerGroup Inc. Revenue (TTM) | ManpowerGroup Inc. Quote
Acquisitions should continue to support top-line growth. Acquisitions contributed 30 basis points (bps) to third-quarter 2018 revenue growth rate and are expected to add 10 bps to the same in the fourth quarter.
The company has a consistent record of rewarding shareholders with dividends and share repurchases. In the first nine months of 2018, the company paid $66 million in dividends and repurchased shares worth $299.2 million. In 2017, the company returned $123.7 million to shareholders in the form of dividends and $203.9 million of share repurchases. In 2016, ManpowerGroup paid $118.4 million of dividend and repurchased shares worth $482.2 million.
Such moves indicate the company’s commitment to create value for shareholders and underline confidence in its business.
In spite of significant growth opportunities, ManpowerGroup is not free from overhangs. Southern Europe — the company’s largest reportable segment (41% of 2017 revenues) — should experience staffing margin pressure resulting from competitiveness and employment (CICE) rate decrease from 7% to 6% in France. Escalation in costs due to investments may decelerate bottom-line growth. Nevertheless, we believe that economic stability, acquisitions and prudent investments bode well for the company in the long run.
Zacks Rank & Stocks to Consider
ABM Industries carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Zacks Business Services sector include Booz Allen Hamilton BAH, Republic Services RSG and Waste Connections WCN. While Booz Allen Hamilton sports a Zacks Rank #1, Republic Services and Waste Connections carry a Zacks Rank #2 (Buy).
Long-term expected EPS (three to five years) growth rate for Booz Allen Hamilton, Republic Services and Waste Connections is 14.4%, 10.7% and 11.7%, respectively.
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