What a fantastic six months it’s been for ManpowerGroup. Shares of the company have skyrocketed 62.6%, hitting $55.29. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in ManpowerGroup, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think ManpowerGroup Will Underperform?
Despite the momentum, we’re cautious about ManpowerGroup. Here are three reasons we avoid MAN, plus one stock we’d rather own.
1. Revenue Spiraling Downwards
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. ManpowerGroup struggled to consistently generate demand over the last five years as its sales dropped at a 1.2% annual rate. This wasn’t a great result and signals it’s a low quality business.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for ManpowerGroup, its EPS declined by 13.8% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
Unfortunately, ManpowerGroup’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
ManpowerGroup falls short of our quality standards. After the recent rally, the stock trades at 13.2× forward P/E (or $55.29 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. Let us point you toward the most entrenched endpoint security platform on the market.
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