Tuesday, July 21, 2009

Manpower Upgrade?

So the Standard and Poor's recently upgraded Manpower to a HOLD from SELL due to a change in how they value the company. Instead of using P/E as a way to value the company they are using P/S instead.

- Yes, Manpower generates massive revenue due to its scale in the global markets. However, quarter on quarter on yearly comps they are performing horribly. There have been small up ticks in employment. But nothing to say that we are out of the woods in terms of employment.

- Another thing to take note. There is not a lot of barrier to entree to recruiting. In each market there are competitive players that are via'ing for that commission fee. Some will under bid in order to win that contract. This causes mischief in this already low margin market.

- Sales from the prior quarter was down dramatically. Unless they continue to cut cost, and reduce overhead through reduced hours, continued cuts in admin, I foresee Manpower's numbers to be fairly muted in the markets that they continued to be weak in. Earnings will be announced on Thursday and I like many will look forward to this. Adecco has slashed a couple hundred from its payroll. I have not seen this from Manpower in a press release. It may want to do that to retain its very expensive valuation.

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