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Accelerating Growth Gets the Job Done at 51job

By Rick Munarriz – Updated May 4, 2018 at 3:30PM

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The Chinese online recruiter delivers another quarter of double-digit revenue growth, its strongest burst since 2010.

China's economy is growing and, apparently, hiring. 51job (JOBS) has come through with its strongest revenue growth in years. The Shanghai-based provider of online recruitment services posted better-than-expected results for its fiscal first quarter after Thursday's market close. You have to go all the way back to late 2010 to find the last time 51job's business was growing faster. This also happens to be the seventh straight quarter of accelerating top-line growth. 

51job's revenue rose 33.5% to hit $129.3 million for the quarter. It was eyeing just $116 million to $120.7 million in revenue three months earlier. 51job is pressing down on the accelerator these days. We've seen year-over-year gains in revenue rise from 10.2% during the second quarter of 2016 to 13.3%, 13.6%, 16%, 20.3%, 22.4%, 25.6%, and now 33.5%% in subsequent periods.

51job headquarters with employees on the outdoor patio.

Image source: 51job.     

Earning that big promotion

It shouldn't come as a surprise to see 51job emerging as a big market winner. The stock has more than doubled over the past year. It's running on all cylinders.  Online recruitment services -- 51job's largest business, accounting for more than two-thirds of its revenue -- rose 30.5% during the period. A 40.2% surge in its other human resource category helped lift 51job's total revenue growth higher. 

No one should be surprised that revenue gains are starting to accelerate. 51job's performance was suppressed dating back to the second quarter of 2016 when a value-added tax (VAT) policy change sandbagged reported revenue. It wasn't until the latter half of the second quarter of 2017 that the year-over-year comparisons became truly organic. However, the consistency of the acceleration is impressive. 

With margins expanding, operating income is growing faster than revenue. A series of one-time events in either the first quarter of 2018 or the comparable period a year earlier blur the bottom-line gain, but the ultimate adjusted profit of $0.60 a share is well ahead of the $0.43 to $0.48 a share it was modeling three months ago. It was a successful quarter on both ends of the income statement, and once again, it's a matter of 51job being overly conservative in its guidance. 

This brings us to 51job's crystal ball as we approach the current period. 51job sees an adjusted profit of $0.59 to $0.64 a share on $136.3 million to $141.1 million in revenue for the second quarter. The revenue goalposts suggest 27% to 31% growth in Chinese currency or a surge of at least 37% on a dollar-based translation from the prior year's $99.3 million showing. It remains to be seen if this will be 51job's eighth straight quarter of accelerating revenue growth, but given its historically conservative guidance, it's easier to side with the bulls on that particular matter. 

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool recommends 51job. The Motley Fool has a disclosure policy.

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