RCRT: INITIATING COVERAGE: Recruiter.com - A Pure Play In Hiring and “The Great Resignation”
NASDAQ:RCRT
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We are initiating coverage of Recruiter.com (NASDAQ:RCRT). Recruiter.com, headquartered in NYC, provides a platform for companies to hire recruiters on a temporary gig or project basis (Recruiters on Demand) as well as providing a traditional staffing business. As more of its revenues move to its faster growing, higher margin, scalable platform and SaaS businesses we expect margins to expand and growth to accelerate We expect the company to reach cash flow breakeven in 2022. While its staffing business is still growing, it is focusing efforts on expanding its AI enhanced platform to more verticals and geographies in the US.
➢ Recruiter.com is a pure play in hiring and investing in The Great Resignation. In contrast to the expected post pandemic Great Rehire, The Great Resignation is being caused by a combination of factors: employees who were already planning to quit delayed their resignations due to the pandemic and as the job market recovers, they have started resigning en masse; incrementally other people, experiencing a different work environment decided to make changes, and finally, employer forced vaccinations have caused another set of people to change employers. The phenomenon is so extreme that Monster has reported that in a poll taken in July, 95% of all employees are considering changing jobs.
➢ The labor shortage has created in an unprecedented level of demand for workers. Recruiter.com benefits as companies move to hire more workers, thus more recruiters and better tools to fill openings. Much of what Recruiter.com does is match employers with suitable recruiting help on a gig basis. As a second derivative of hiring, the demand for recruiters have grown even faster that the demand for talent, and prices are increasing benefiting Recruiter.com.
➢ Recruiter.com’s automated platform using AI provides a scalable model providing increasing margins through operating leverage.
➢ Recruiter.com closed the acquisition of Novo Group on August 27th, which we believe could add $500,000 or more a month to sales.
➢ As a traditional staffing company, moving an increasing percentage of sales to its matching platform and software tools, Recruiter.com should enjoy increasing operating profits, cash flow, and valuation. Rather than trading as a staffing company the business should be valued more like a SaaS platform company as it garners more of its sales from those business lines.
➢ At an enterprise value of $48 million, Recruiter.com is trading at an EV/2021 Sales of 2.3 times compared to the blended multiple of 5.8 times of its peers. We believe growth, expanding margins, analyst coverage and its new listing on NASDAQ could increase the stock’s appeal and cause appreciation.
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