There's a hiring boom in the world's most populous nation, and 51job (NASDAQ:JOBS) is there to help make things happen as a leading Chinese provider of online recruitment services.
The Chinese company may have gotten its start with a modest model -- inserting regional job listings in dozens of local Chinese newspapers -- but it has embraced the merits of cyberspace to parlay its brand into a dot-com darling in human resources.
This leads us to Thursday when 51job reports results for the third quarter. Let's go over a few of the things that investors will want to keep an eye on as we take in fresh financials.
1. Steady growth should continue to surpass expectations
Analysts see another period of top- and bottom-line growth in the low double digits. They see revenue climbing and earnings per share climbing 11% and 13%, respectively, over the prior year's third quarter.
That may not seem like very exciting stuff, but keep in mind that at least it's moving in the right direction. It's holding up better than former stateside darling Monster Worldwide (NYSE:MWW) which reports two days before 51job. It's expected to post declining revenue and profitability for all of 2014.
There's also the welcome trend of surpassing analyst profit targets. Unlike Monster that missed Wall Street income forecasts in back-to-back quarters before Tuesday morning's report, 51job has trounced those estimates for three straight quarters heading into Thursday afternoon's results. The trend bodes well for 51job to surpass the earnings of $0.36 a share that the market is expecting.
Wall Street pros see revenue and earnings growth accelerating next year. A fourth bottom-line beat in a row could send those models even higher.
2. Employers using 51job should grow faster than overall revenue
It won't come as a surprise to see the base of employers leaning on 51job to fill openings growing faster than overall revenue. Revenue growth itself is being sandbagged as 51job continues to dismantle its legacy business of weekly job listings in print, but even if we limit ourselves to online revenue we should see the employer count growing faster.
We saw this happen during the second quarter. The number of unique employers increased 21% to 280,203, faster than the 13% uptick in overall revenue growth and the 16% increase in online recruitment services.
It may seem problematic to see average revenue per user slip, but this is more than acceptable as 51job pushes to increase its market position. Two factors contributing to that trend -- a spike in first time users opting for basic lower-priced packages and a Chinawide VAT policy change going in effect back in June that slightly suppresses reported revenue -- will continue in the near term.
3. Consolidation could help spike organic growth in the future
Recruiting is a pretty wide field, and with the highly fragmented realm of human resources providers it's easy to see an opportunity for 51job to buy its way into headier growth. It had $678.3 million -- or a little more than a third of its market cap -- in cash and marketable securities as of the end of June, so there's a big opportunity there to go shopping.
"We remain very open-minded to utilizing our cash resources for acquisitions and we are actively seeking opportunities related to the HR space in China," 51job said in its last earnings call.
It will be interesting to see if it has made any progress on putting its money to work with buyouts. It can continue to use its growing cash balance to buy more shares, but making a needle-moving acquisition or two is the better way to turn heads in a ripe fit for consolidation.