A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we focus on ManpowerGroup Inc. (MAN - Free Report) , which has a long-term (three to five years) EPS growth rate of 3.1% and a Growth Score of B. The stock gained 31% over the past year, significantly outperforming the 20.8% rally of the industry it belongs to.
Factors That Bode Well
ManpowerGroup is trying to mitigate its ongoing revenue softness through strong pricing discipline and cost control. It is expected to witness strong growth in the solutions business, especially in MSP and RPO solutions, through 2019.
In a bid to increase productivity and efficiency, the company is making significant investments in technology. It is implementing front office systems, cloud-based and mobile applications, and making enhancements to its global technology infrastructure across several markets. The company is also investing in digitalization of its workforce solutions.
Financially, ManpowerGroup remains in good shape, with $592 million in cash and cash equivalents and debt-to-capitalization ratio of 29.1%, as of Dec 31, 2018.
ManpowerGroup Inc. EPS Diluted (TTM)
The company has an impressive track record of returning capital to shareholders through stock repurchases and dividends. It returned $500.7 million, $203.9 million, $482.2 million through share repurchases and made dividend payments of $127.3, $123.7 and $118.4, respectively in 2018, 2017 and 2016.
Despite riding on significant growth prospects, ManpowerGroup is not free from overhangs. Southern Europe, the company’s largest reportable segment (43% of 2018 revenues), is likely to continue to experience staffing margin pressure, resulting from loss of competitiveness and employment (CICE) subsidy in France.
Escalation in costs due to investments may decelerate earnings growth. Nevertheless, we believe that prudent investments and shareholder friendly moves bode well for the company in the long run.
Zacks Rank & Stocks to Consider
Currently, ManpowerGroup is a Zacks Rank #3 (Hold) stock.
Some top-ranked stocks in the broader Zacks Business Services sector are Insperity (NSP - Free Report) , Broadridge (BR - Free Report) and Automatic Data Processing (ADP - Free Report) . While Insperity sports a Zacks Rank #1 (Strong Buy), both Broadridge and Automatic Data Processing carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term expected EPS (three to five years) growth rate for Insperity, Broadridge and Automatic Data Processing is 18%, 10% and 13%, respectively.
Radical New Technology Creates $12.3 Trillion Opportunity
Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.
Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” -- and early investors stand to earn the biggest profits.
See the 7 breakthrough stocks now>>