Is Monster Worldwide Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Monster Worldwide (MWW) fit the bill? Let's look at what its recent results tell us about its potential for future gains.

What we're looking for
The graphs you're about to see tell Monster's story, and we'll be grading the quality of that story in several ways:

• Growth: Are profits, margins, and free cash flow all increasing?
• Valuation: Is share price growing in line with earnings per share?
• Opportunities: Is return on equity increasing while debt to equity declines?
• Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let's look at Monster's key statistics:

MWW Total Return Price data by YCharts

Source: YCharts.
*Period begins at end of Q3 2010.

MWW Return on Equity (TTM) data by YCharts

Source: YCharts.
*Period begins at end of Q3 2010.

How we got here and where we're going
Things don't look good at all for Monster in its second assessment too, as this online job repository has mustered only one out of seven possible passing grades. This seems ugly, but it's actually an improvement over the zero-for-seven score Monster earned last year. Monster has shed nearly two-thirds of its value over the past three years, and has been looking to sell its businesses in the middle of a major shift in the way job hunters seek and are sought for new opportunities online. Can Monster find ways to create value for any prospective bidder? Can it turn itself around without losing much of what made it successful in the process? Let's dig a little deeper to find out.

The growing significance of social networking based employment solutions, combined with an odd dichotomy of high unemployment rates but low hiring interest in the U.S. several years after the end of a recession, have been major hindrances to Monster's growth in this new economy. Fool contributor Dan Caplinger notes that LinkedIn (LNKD.DL) and Facebook (META 0.43%) have done an outstanding job of creating employment opportunities through social networking, which has undermined Monster's presence in online recruiting services. LinkedIn has created an extensive economic moat by expanding into corporate enterprise and relationship management, while pushing its premium offerings for business professionals. Facebook's relatively new jobs app could yet emerge as a potential threat for LinkedIn and Monster simply because of the staggering size of its user base, which is now thought to be more than 1.2 billion active users. Fool contributor Tim Brugger also notes that privately held RelSci's Relationship Science professional networking service could emerge from nowhere to become the next potential challenge in the business social media space.

On the other hand, Monster's completed its corporate restructuring, which will allow it to cut operating costs by more than $130 million each year. The company also recently divested its 49.9% minority stake in South Korea's JobKorea to a private equity firm in a deal worth $90 million. Monster also expanded its joint partnership with Alma Media, which will help it seize more market share in Eastern Europe and the Baltic region. Fool analyst Evan Niu points out that Monster has been looking to sell itself, but it also reassured investors with a $200 million share buyback program as a fallback, should the company fail to find a buyer. With shares trading at less than 0.7 times sales and 13 times forward earnings, Monster appears to be a relatively cheaper way to break into the recruitment and career space, but compared to the higher valuations of social-media competitors, it looks a bit like a value trap.

Putting the pieces together
Today, Monster Worldwide has few of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy -- or to stay away from a stock that's going nowhere.