Service Industry Trends And Its Impact On Wilhelmina International Inc (NASDAQ:WHLM)
Wilhelmina International Inc (NASDAQ:WHLM), a US$34.50M small-cap, is a commercial services company operating in an industry, which generally follows the ups and downs of the economic cycle, as its services cater to various industries across different sectors. Commercial services analysts are forecasting for the entire industry, a strong double-digit growth of 10.45% in the upcoming year . Today, I will analyse the industry outlook, as well as evaluate whether Wilhelmina International is lagging or leading in the industry. View our latest analysis for Wilhelmina International
What’s the catalyst for Wilhelmina International’s sector growth?
E-commerce remains a later driver of growth for commercial services, which enables service companies to grow share and reduce cost to serve. More than ever, it is crucial for the incumbents to position itself to respond to the growing relevance of stock-less independent dealers, further service pure e-commerce players and also build on their own e-commerce capabilities. In the past year, the industry delivered growth of 6.67%, though still underperforming the wider US stock market. Wilhelmina International lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its commercial services peers. As the company trails the rest of the industry in terms of growth, Wilhelmina International may also be a cheaper stock relative to its peers.
Is Wilhelmina International and the sector relatively cheap?
Commercial services companies are typically trading at a PE of 19.97x, relatively similar to the rest of the US stock market PE of 19.15x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 12.42% on equities compared to the market’s 10.46%. Since Wilhelmina International’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Wilhelmina International’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Wilhelmina International has been a commercial services industry laggard in the past year. If Wilhelmina International has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its services peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Wilhelmina International’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has WHLM’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Wilhelmina International? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
