Running a human-resources business in China has to be like shooting fish in a barrel. Between a dynamic economy that has grown at a 10% clip over the past few years and 1.3 billion potential hires in the world's most populous nation, 51job
Monday night, the company behind the popular 51job Weekly employment classifieds publication saw second-quarter revenues climb 18% higher to hit the U.S. equivalent of $21.7 million. That may not seem like much, especially when you consider that the slower stateside economy still found Monster.com parent Monster Worldwide
However, it's also important to contrast 51job's slower print business -- whose revenue climbed just 7% higher during the quarter -- with the online-recruitment and executive-search segments, which posted hearty top-line improvements of 41% and 36%, respectively.
Margins improved to the point of allowing profits to soar 79% higher to $0.16 per American Depositary Share, before stock-based compensation expenses and currency-related hits. Analysts were expecting earnings to clock in at only $0.11 per ADS, even though they nailed the top-line gain.
The current quarter will be challenging, though. The company is looking to earn between $0.13 and $0.15 per ADS on $21.6 million to $22.9 million in revenue. That's fine on the earnings front, since Wall Street was projecting profitability of $0.13 per ADS. But it's not cool on the top line, where the potential of flat sequential growth flies in the face of the $24.1 million that analysts have been targeting.
The world understands the potential in China. Investors do, too. Our stock newsletters are ripe with recommendations in the region. Ctrip
No, 51job hasn't made the cut in any of our newsletters, but the after-hours slide, which drove the shares into the high teens, does pose some intriguing value-based possibilities. Now trading at 38 times this year's earnings and 28 times next year's profit potential, 51job isn't a screaming value. But with an improving economy placing a greater value on landing quality hires, the company is at the right place at the right time. Risk-tolerant investors may also be feeling the same way.
Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin companies for years, but he holds no financial position in any companies mentioned above. He recommended NetEase.com last year to Rule Breakers subscribers. The Fool has a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.