SEEK Limited (ASX: SEK) shares have fallen nearly 20% over the past six months, is it time to buy?
SEEK is an online employment business that matches job seekers and employers together. It is also used by hiring agencies to build a portfolio of candidates. SEEK operates in a list of countries including Australia, New Zealand and China. SEEK also offers online education services and volunteering opportunities for not-for-profits.
3 reasons to consider SEEK shares
1. Market leader in Australia: Many of the world’s leading online platform or networking businesses create growing market power after becoming number one. Just look at how Google, Facebook and Amazon are titans in their respective industries. Once you have the number-one position you can increase pricing with (usually) little in the way of negative effects.
2. Would you like fries with that? SEEK has achieved clear market leadership in employment and now it is working on adding additional services. SEEK education services is one area of growth. Using product, tech and data to create insights also allows SEEK to offer the most relevant candidate or career to the prospective user. It also operates a leading Australian recruiter application tool and an online platform for issuing, storing and sharing academic documents which is live at 65 universities.
3. International earnings: Not many of Australia’s leading companies have impressive international earnings profiles. SEEK currently operates in 18 countries and has a market leading position in 14 of them. China, South East Asia, Brazil and Bangladesh are just some of the places where SEEK is growing.
Over two-thirds of SEEK’s revenue comes from outside of Australia & New Zealand. SEEK has a very important stake in Zhaopin, which is the market leader in China by the number of hirers and registered users. China is a huge market and could generate impressive revenue growth for SEEK for many years to come. Zhaopin’s revenue has grown at a compound annual growth rate of 19% between FY12 and FY18.
One reason not to like SEEK:
People will always be looking for jobs. But, economies go through cycles and job markets can have recessions too.
Australia’s employment market has gone on a great run in recent years and that could slow down at some point, which may hurt the number of jobs being advertised and therefore SEEK’s shorter-term earnings.
For that reason, it might be better to consider businesses that are less exposed to cyclical forces for now, such as the shares in the free report below.
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