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PageGroup - you would still be bonkers

By Chris Bailey | Wednesday 11 April 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Back in January I said that you were a bonkers bull if you bought shares in the recruitment company PageGroup (PAGE) and over the last four months the share price has struggled to crack on from the excitable 540p+ level it reached in mid-January. I still think this is the case...but today's trading update is notable for another trend: everywhere bar the UK is still growing for the group.

So poor old UK where a 7.1% sales fall was apparent as 'confidence continued to be impacted by uncertainty'. I am almost surprised they did not throw in an explicit Brexit comment like those rogues at McCarthy & Stone (MCS) did earlier today. Now we all know really why the UK is struggling a bit: when an economy does not grow that much and companies are hence not made on hiring, recruitment companies struggle a bit.

For me the reason why I think you are bonkers buying a share like PageGroup today is that your investment is aligned to synchronised global growth hopes. Do you remember back at the start of the year where all those crazy strategy types were talking about a 'Goldilocks economy' i.e. neither too hot nor too cold? Well the three bears have discovered her and scoffed the porridge judging by some of the fade in economic lead indicators, world trade chat and the like. So today's trading update which globally notes the 'best Q1 growth rate since 2011' and 'large, high potential markets' (such as the US, Germany, China) showing a 21% growth rate is all about the past rather than the future. Amusingly even the company notes some of the challenges out there:

'However, a number of macro-economic uncertainties remain, including Brexit in the UK, challenges in Catalonia, potential impact from strikes in France, and Brazil’s forthcoming elections'

The company reiterated consensus operating profit hopes of £132 million for the year, which puts the stock on a mid-teens forward multiple. That's not mega expensive but it is not mega cheap either. Put it all together and it does not excite me and risk-reward is shabby. You would still be bonkers to buy PageGroup, focus on other names instead.

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