Monster Worldwide, Inc. (NYSE:MWW) has been losing its popularity in the recruitment industry, due to the sudden emergence of social networking sites LinkedIn Corp (NYSE:LNKD) and Facebook Inc (NASDAQ:FB). Consequently, Monster Worldwide, Inc. (NYSE:MWW) has seen its share price drop significantly, from $25 per share at the beginning of 2011 to only $5.50 per share today. At the beginning of May, the company said that if it could not sell itself, it would buy back its shares. Is Monster Worldwide a buy now? Let’s find out.
Business snapshot
Monster Worldwide, Inc. (NYSE:MWW) describes itself as a global leader in the recruitment industry, with the presence in more than 40 countries, operating in three main business segments: Careers-North America, Careers-International and Internet Advertising & Fees. Most of its revenue, $463 million, or 52% of the total 2012 revenue, were generated from Careers-North America segment while the Careers-International segment’s revenue was $351.1 million. In 2012, Monster Worldwide, Inc. (NYSE:MWW) produced a significant loss of nearly $259 million on the total revenue of $890.4 million. The significant loss was mainly due to a $262.7 million in goodwill impairment charge of Careers-China.
What I like about Monster Worldwide, Inc. (NYSE:MWW) is its conservative capital structure. As of March 2013, it had $851 million in equity, $131 million in cash and only $170 million in debt. However, because the company has grown via acquisitions, its goodwill amount was quite high, at $881 million. Thus, the tangible book value was negative at $(30) million. At $5.50 per share, Monster Worldwide is worth nearly $645 million. The market values the company at 0.73 times its sales and 12.5 times its forward earnings.
LinkedIn and Facebook – two huge social networking sites
As mentioned above, employees and employers have been turning to LinkedIn and even Facebook for employment opportunities. Many employers are using both LinkedIn Corp (NYSE:LNKD) and Facebook to advertise their career opportunities and to target selected potential employees. LinkedIn currently has as much as 200 million members in more than 200 countries. Thus, with $18.50 billion in total market cap, each LinkedIn user is worth $92.50 on the market. Most of its revenue, $523.6 million, or 53.8% of the total 2012 revenue, was generated from Talent Solutions, while the Marketing Solutions contributed only half of that, at $258.3 million in sales.
For the full year 2013, LinkedIn Corp (NYSE:LNKD) expected to generate around $1.43 to $1.46 billion. The adjusted EBITDA might come in the range of $330 – $345 million. In order to boost its potential Talent Solutions, Marketing Solutions and Premium Subscription revenue in a long run, LinkedIn has been trying to tap into the mobile space. In the middle of April, LinkedIn announced the acquisition of Pulse for around $90 million, one of the leading newsreader and mobile content distribution platform. For around three years in operations, Pulse has around 30 million users in more than 190 countries globally.
Facebook Inc (NASDAQ:FB) has many more users, at a total of around 1.11 billion. It is trading at around $24.30 per share, with a total market cap of $58.80 billion. So each Facebook Inc (NASDAQ:FB) user is worth around $53 on the market. What is interesting about Facebook is the fact that it owns private data of its users, including pictures, status, activity updates, etc. Thus, those are invaluable assets waiting to be monetized. Currently, Facebook generated most of its revenue from advertisements. In the first quarter 2013, around 85% of its total revenue, or $1.25 billion, was derived from advertisements.
The social networking effect places high valuation multiples on both LinkedIn and Facebook. While LinkedIn is trading at more than 16.8 times its sales and nearly 80 times its forward earnings, Facebook’s P/S and forward P/E stays at 10.8 times its sales and 31.6 times its forward earnings.
My Foolish take
Quantitatively, Monster Worldwide, Inc. (NYSE:MWW) seems to be quite cheap with much lower sales and earnings multiple. However, the business has been declining. In contrast, LinkedIn and Facebook, despite high valuation multiples, could fit well in technology portfolios of long-term investors, thanks to their huge sticky users’ base and solid social networking platform.
The article Is Monster Worldwide Cheap Now? originally appeared on Fool.com and is written by Anh Hoang.
Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Facebook and LinkedIn. The Motley Fool owns shares of Facebook and LinkedIn. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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