Every day's a tough job for 51job (NASDAQ:JOBS). Running China's popular 51job Weekly employment-classifieds publication isn't as lucrative a business as one would think.
The company's print-ad business grew by less than 6% during the quarter. Yes, domestic print publications have been faring worse, but we're talking about an economy that has been growing at a 10% annualized clip or better over the past few years. In other words, 51job's flagship product is lagging the growth of the nation around it.
However, 51job also has an online recruitment subsidiary, which is gradually becoming a larger part of the revenue mix. On that side of the 51job story, the top line soared nearly 30% higher. Over the past year, online recruitment has gone from 28% to 32% of total revenue at the company.
This may not be enough to tag the company as China's version of Monster.com parent Monster Worldwide (NASDAQ:MNST), but bear with me here.
Domestically, I have seen a few firms transform into engaging new-economy companies as their Internet-based endeavors outgrow their original old-school print business. Whether we're talking about CNET (NASDAQ:CNET) with the Computer Shopper magazine, which it has since sold off, or The Knot (NASDAQ:KNOT) with its print bridal directories, the shifts bear watching. CNET and The Knot both eventually became Rule Breakers newsletter picks. Their top lines didn't tell the whole story, as the print business sandbagged their ultimate dot-com calling -- spelling opportunity for investors.
That would explain why I have no problem with 51job's revenues growing by just 13% for the September quarter. I prefer to reflect on the 59% boost in profitability, which reflects the inroads the company has made in the more margin-happy space of Web-based human resources services.
After seeing companies like Baidu (NASDAQ:BIDU) and ShandaInteractive (NASDAQ:SNDA) blow past their profit targets over the past few days, 51job's earnings of $0.12 a share may not get your adrenaline flowing. A mere penny more than Wall Street's expectations of $0.11 a share? Insert yawn here. However, it is also the third consecutive quarter in which the company beat analysts' predictions.
Now may not be the time to load up on shares of 51job, but keep watching it over the next few quarters. If the higher-margin online business continues to expand, this relatively obscure Chinese growth stock may start showing up on a few more Wall Street radar screens.
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Longtime Fool contributor Rick Munarriz believes in the sector, and he does own shares in Baidu. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
