Hays PLC (LON:HAS) edged higher on Monday as the recruiter was lifted up to ‘outperform’ by analysts at RBC Capital, who think now is the time to buy in after a recent sell-off.
The FTSE 250-listed firm's shares are off almost 10% over the past weeks, and RBC estimates that the stock has underperformed its rivals by around 15% so far this year.
READ: Hays reports slowdown in gross profit despite benefit of late Easter
RBC reckons this reflects “tough trading” in some of Hays’ key markets, namely the UK, Germany and Australia.
Fewer hires in Germany’s huge automotive industry has knocked performance there, Brexit uncertainty is still affecting UK companies’ hiring decisions, and the Australian market has slowed ahead of elections.
“However, Hays continues to have very strong businesses in all three markets,” said analysts in a note to clients.
“We see potential for continued structural growth in Germany and a Brexit rebound at some point in the UK. At the group level, growth comparatives start to get easier from Q119 onwards (Q418 growth was 15% vs Q319 at 5%).”
RBC loves what bosses are doing
They added that Hays is an “extremely well-run business” and praised management’s plan to increase exposure to technical specialisms, invest in technology and focus on cash conversion.
“[These] are exactly the right focus areas for a staffing business,” RBC said.
The chin scratchers also point to the potential for £100mln of special dividends over the next few years, which would give Hays a potential yield of around 8%.
They concluded: “Whilst we are cognisant of uncertainty over key markets, we believe the recent weakness presents a good buying opportunity into a quality operator.
“Valuation is undemanding and the balance sheet and dividend yield potential are supportive. We move to ‘outperform’, maintaining our mid-cycle discounted cash flow target price of 175p.”
Hays shares were up 0.6% to 150p on Monday morning.