Northern Recruitment is out-performing the rest of the sector yet it languishes on a PE way below most in the sector. Is it because the name isn't fancy? Have they just been overlooked? They are on the full market and can be ISA'd. This week Brewin Dolphin have upped estimates for the next two years by over 20% pa and rated them a Buy.

Here's some comparisons:


Michael Page (MPI) - 174p offer
H1 = sales 87m - eps 2p, H2 = sales 91m - eps 1.8p.
Full year 3.8p eps – down 2p from 5.8p in 2002

Last 3 years eps = 9.2p, 5.9p, 3.8p

Forecast eps 5.2p, forecast PE 33.5



Robert Walters (RWA) – 145p offer
H1 = sales 25.3m – eps 1.2p, up 0.3p from 2002

Last 3 year eps = 11.5p, 6.9p, 2.0p

Forecast eps 2.5p, forecast PE 65



Harvey Nash (HVN) – 100p offer
H1 = sales 64.3m – eps 0.15p

Last 3 years eps = 26.4p, 2.8p, 7.1p (FRS3 24p, -38p, -15p)

Forecast eps 1.74p (company says results will be well ahead), forecast PE 57



NORTHERN RECRUITMENT (NRG) - 162p offer
H1 = sales 11m – eps 4.1p

Last 5 years eps = 5.0p, 3.4p, 5.8p

Forecast eps 8.78p (4.1p already under the belt in H1), forecast PE 18.5

The earnings upgrade for 2005 is more than 2p to 11.15p so come NRG's results in Sep the forward PE will be just 14.5 at this price. I'd expect NRG to beat estimates too.

But just based on this years earnings NRG's PE is 18.5 compared to Pe's in the 50-60s, MPI being on 35.

Northern Recruitments earnings growth is 88% for H1 and set to be the same or there abouts for the full year.

All of this growth, nearly 100% and on a PE in the low teens compared to it's peers racey ratings. Northern Recruitment also fared far better through the downturn than any of its rivals and has a very consistent earnings record for a company in a sector which saw a severe downturn.

This stock must get re-rated imo - Brewin's note seems to have stimulated some buyers the last two days too.

CR

Only purely personal and humble opinion here, but it may help you to choose
and be useful for you to know which recruitment sectors they are involved in,
and what industries are they serving.
Second question then has to be what is the current condition of those
industries/sectors? How much spare cash or need is there for recruitment?
As these things will directly affect the amount of business that may
pass in the direction of recruitment firms and also importantly the
level of fee ratio the companies will negotiate for the supply of staff,
in turn, this will directly reflect in what these companies can earn.
If times are bad companies are going to think twice about even a 10%
fee for employee placement through an agency.
Lastly what's the competition amongst those well established in the sector?
Just some thoughts in the spirit of sharing ideas!

True Stockbunny.

But in all honesty I'd have thought last year was as bad as it gets for any of these companies, hence the improvements being announced by all of them. I don't think we've got anywhere near bullish margins or peaking in the sector.

Recruitment, as the yanks are discovering, is yet to pick up as companies are now far more productive and so increasing staff falls further down the recovery chain imo.

Either way, NRG look to be improving margins nicely and sales and on the current forward rating of 14 hardly seem to be factoring in much growth.

Sharebear - re Hat Pin. Yes, this is a cheap recruitment stock too - concentrating on the media sector which will benefit from increased activity due to The US election, Olympics and Euro 2004. I like and hold both. Since the NRG results I have to say they look the cheapest but HTP benefit in their exposure to the media sector.

I see Whitehead Man FD has just bought 10K shares in his own co too - a sign of the times?

CR

If you want to know more about them Stockbunny, here's their website:

http://www.nrgplc.com/aboutus.html

Thanks but I must be honest my money is in Hays in the recruitment sector.
Good luck and I hope they come good for you, as you rightly say all
these firms have a way to go before the 'really good times' come.

A nice buying opportunity - Hays results might be dragging others down but with NRG's forecast PE so low and recent broker upgrades they must be the cheapest in the sector imo.

CR