Dice Holdings Will Hit New Highs
Julian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Dice Holdings (NYSE: DHX), a niche online job-board operator, is an arch rival of Monster Worldwide (NYSE: MWW). Although lesser known and far smaller, with just 534 employees as compared to Monster's 5,000, Dice is beginning to distance itself from its larger rival based on financial and operating disciplines. Here are three reasons Dice's undervalued business is outperforming and why its share price should hit new 52-week highs over the remainder of fiscal 2013.
1. Maxing out operating and profit margins
Dice is currently posting metrics that leave many of its publicly traded competitors in its wake. The company's profit margin for the trailing twelve months (ttm) ended Dec. 31, 2012 was 19.50%. Its operating margin was 30.17% in the same period, with a trailing P/E of 17.32.
Monster Worldwide is significantly under-performing, with a declining profit margin of -29.06%, an operating margin of just 8.14%, and a non-existent trailing P/E ratio. Monster recently launched a Facebook application called "BeKnown" but with just 100,000 or so users, the portal has yet to find traction. Privately held Glass Door, in contrast, offers a similar application but has more than 1 million Facebook users.
Networking website LinkedIn (NYSE: LNKD), founded by serial Internet entrepreneur Reid Hoffman, is beginning to muscle its way into the job-board and talent-solution arena. In the fourth quarter, LinkedIn reported that revenue in "talent solutions" products increased 90% versus the same period in 2011. Despite these gains, LinkedIn still trails Dice Holdings in the overall health of its business, with with an astounding trailing P/E of 945.21, a paltry profit margin of 2.22% and operating margin of 5.85%.
2. Energy, health and technology segments are soaring
Dice, unlike Monster and LinkedIn, publishes specialized websites for select industries rather than manage a single career website for all job seekers. This divide-and-conquer strategy continues to make sense, as Dice is experiencing solid gains in its technology segment while its energy and health care verticals also showing strength.
For the fourth quarter, Dice's "tech and clearance" segments increased 19% year-over-year (y-o-y) to $37.1 million, which represents 70% of Dice's consolidated revenues. Last year, Dice acquired Slashdot Media (which includes sub-brands Slashdot, SourceForge and Freecode) and added the brand to its roster of technology job sites. This added $4.7 million to the segment's quarterly revenues.
Dice's energy segment, which features RigZone, -- a career website for the oil and gas industry -- grew 26% y-o-y and delivered $5.3 million in revenue for the quarter. The health care category, which manages portal Health Callings, has yet to deliver significant revenue but still moved up sharply, with 20% y-o-y gains.
3. Share buy-backs should continue to lift the stock
Dice's management team continues to utilize its cash position to buy back its own stock, which is generally a positive for shareholders. In the fourth quarter alone, Dice Holdings purchased 1.3 million shares of its common stock at an average cost of $8.60 per share. For the year ended Dec. 30, 2012, the company bought back 7.7 million shares for a total investment of approximately $68.6 million. The company's board of directors continues to believe in the merits of the buyback program and has authorized another $50 million of stock to be purchased in the coming quarters.
Dice should hit break through it 52-week high
Over the last year, Dice's share price has ping-ponged between $6 and $11, hitting a high of $10.99 on April 27, 2012, according to Yahoo! Finance. First quarter earnings are scheduled to be reported on April 22 and the stock price is already inching up towards its high, closing at $10.22 on March 22. Dice now has the wind at its back with strong margins, double-digit segment growth, a significant share buyback program and an improving employment picture in the U.S.
With first quarter earnings approaching, Dice should be able to easily beat revenue and earnings estimates--and push its stock back above $11 per share and toward the high teens.
Julian Willis 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!