Sunday, October 11, 2009

Manpower MAN Valuation October 2009

So recently Citigroup Research has downgraded its rating near term of Manpower from "Buy" to "Hold", I will touch my own opinion of the valuations of MAN. Please do your own research with regards to the buying and selling of equities. I am not endorsing or advocating for the direction of a position.

From the near term analysis, MAN still seems overvalued.

P/E aspect MAN trades at 75.5 times current earnings. This should improve as MAN sales improve. However, at current mutiples this is well ahead of its valuation versus the SP and its peers.

Price to Book is also another metric to value a stock. Currently MAN trades at 1.72 which is well above its fair book value.

The yield of MAN is also below that of the SP. MAN current yield is 1.32%. The average is about 2.65 for the SP. Remember that compounded dividend may help your investment grow and offset any near term losses.

MAN's current profit margins of .7% also leaves growth oriented investors to be very cautious. Stock prices usually follow bursting sales and net income. EPS is a -82.09% and sales are a -35.70% for the year compared to last year.

Profit margins also continue to be very uneven, thus difficult to project business activity due to the nature of this cyclical cycle. Current year is 1.02%, last year 2.36%, two years ago it was 2.27%.

MAN also has a debt load, currently at 33.10%. Companies borrow to expand, however as sales falls, and credit conditions remain tight it is advised to look at companies that don't need to borrow, or leverage themselves as much to grow. If another recession becomes present in the near term once this initial stimulus wears off, then this debt may possibly become a problem.

So the bottom line, is that growth oriented investors should look elsewhere for a better story. Value investors should probably look elsewhere for a higher yield. While, those that fall in between should wait and see earnings on the 21st of this month. This is important as MAN projects this to be their strongest quarter of the year. However, will this justify their current valuation. At the mutiples of well over 75x current earnings, and with sales and profit margins as weak as they are, MAN should not be trading at the current multiples. It is out of line versus its peers and versus the market. If there are any questions regarding this analysis feel free to shoot a comment, and I will be more then happy to respond.

No comments:

Post a Comment

RSS Feed