Keep This Stock on Your Radar
Ashley is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Among the various online job portals, Dice Holdings (NYSE: DHX) might be one of the biggest underdogs. With just above 500 employees to its name, Dice Holdings is competing against giants such as LinkedIn (NYSE: LNKD) and Monster Worldwide (NYSE: MWW). The company recently hit a 52-week high and looks set to climb higher. Here’s a take on why this company would be a class apart as compared to its competitors.
Dice holdings and its competition
Before we analyze how Dice holdings is performing, let’s have a look at how Monster and LinkedIn have been performing.
The profit margins of Monster Worldwide have decreased 29% and its operating margin is at 8%. The company’s trailing P/E ratio is literally non-existent. The company has tried to add value to its service by introducing a new Facebook-oriented platform called “BeKnown,” but with just 100,000 users, the company has found it hard to keep up with “Glassdoor,” a similar platform that has attracted over a million users on Facebook.
LinkedIn is the company that is in pole position as far as online talent solutions are concerned. There was an increase of 90% in total revenue in the fourth quarter of last year as compared to 2011. Despite a P/E ratio of 695, an operating margin of 5.8%, and a paltry profit margin of 2.2%, the company is still behind in terms of the overall health of its business.
Dice Holdings, at the moment, is impressing a lot of investors with last year’s performance. After its April earnings release, the company’s stock did dip, but as of now, it is climbing up and has strong reason for the same.
There was significant growth in the initial stages this year. As of Dec. 31, 2012, the company had a profit margin of 19.5%, operating margin was at 30%, and projected earnings ratio was at 17.32. This gave reason to investors to believe in the company.
In the first quarter this year, the company met profit expectations but failed to meet revenue expectations. This failed to impress shareholders which resulted in a steep decline in stock price. Adjusted earnings decreased 7.6% and the company also missed the average revenue estimate of $50 million. But, the company's overall outlook looks bright.
How Dice is set to gain
Unlike other online job portals, Dice is industry specific as opposed to the conventional all in one job portal. The company publishes independent websites catering to individual industries. This is what sets Dice apart from portals like LinkedIn and Monster Worldwide. The strategy is to basically split the whole industry into segments and cater to each segment specifically. Using this strategy, Dice has managed to fetch significant revenue from the “technology” segment and the “energy and health care” segment looks very promising as well.
Through the Tech segment, Dice managed to fetch $37 million, which was a 19% increase as compared to a year ago. To capitalize on this segment, Dice has acquired Slashdot Media, which will widen the segment by bringing in relevant technology-oriented opportunities. Slashdot was able to add $4.7 million to quarterly revenue.
Dice’s oil and gas segment features a career-oriented website called RigZone. This website helped the company increase its revenue by 26%. Another of Dice’s website, “Health Callings” (health and care segment), is yet to fulfill its true potential but has contributed to an increase in revenue by 20%.
Dice executives have been using their strong cash position to buy back shares, which is good news for existing shareholders. In the last quarter of 2012, the company had purchased a total of 1.3 million shares at an average of $8.60 per share. In 2012, the company bought back a total of 7.6 million shares worth $69 million. Dice's management has granted $50 million worth of stock to be bought back in the coming quarters.
A look at the future
The company is showing double-digit growth in almost all departments. The country's overall job structure seems to be improving and the company is aggressively pushing for stock buybacks. Considering these factors, I think Dice might do well going forward.
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Ashley Sales has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!