Wellicht toch maar eens een paar call opties schrijven als de stijging volgende week doorzet.
Ook naar aanleiding van een uitgebreid artikel over de uitzenders op SeekingAlpha , een paar dagen geleden geplaatst.
Hieronder het relevante gedeelte
What I like about Randstad is its consistency in become more profitable, though it operates in a low-margin industry. In fact, while revenue increased 12% YoY, gross profit increased 17% YoY and net income saw a 21% surge. Free cash flow increased by 25% to €739. At the end of the year, though its EBITA margin shrunk from 4.4% to 4.2%, its net income margin actually increased by 30 bps, moving up to 3.4% from 3.1%.
What is driving Randstad's increased profitability is its shift from staffing revenues, which are almost flat YoY, to other sources of higher margin revenues. Therefore, we see that the in-house, the professionals, and the global businesses division have grown more than staffing, pushing Randstad's profitability upwards.
Meanwhile, the company keeps on having a very low leverage ratio of 0.6 net debt/EBITDA, though it hasn't been idle from an acquisition point of view.
Thanks to these results, Randstad will increase its dividend by 30%, paying €2.85 per share, which is in line with Randstad's policy to return 50% of adj. net income. It has also approved a buyback program of €400 million over a period of 17 months, starting end of April 2023, something rather new for Randstad, which is used to keeping its share outstanding count quite flat. Between dividends and buybacks, we are at an 8% total return.
Overall, however, the company plans on returning €200 million more compared to its free cash flow. On one side, it shows Randstad's strong balance sheet (stronger than Adecco's). On the other, an analyst during the earnings call addressed this issue pointing out that this could somehow hinder other M&A activities in the pipeline. Henry Schirmer, the CFO, replied in this way
When we do capital allocation decisions, then of course, the first look is always to support our organic growth, our strategy, and what we potentially have in mind as far as M&A is concerned. We are predominantly -- as part of us actually will continue to grow organically, but supported by programmatic M&A, as we always said. And with that kind of proposal, we have everything we want to do as far as firepower is concerned. Why more than cash flow generated? It's just a function of starting that consideration with kind of low leverage ratio of 0.2%. So that is -- that's the main reason.
I think the answer is fair and well-supported by Randstad's financials. So, for this year, we can give it a pass, even though my readers know I am not particularly fond of this kind of operations as I want to see the annual free cash flow supporting shareholder returns to the point that, if necessary, a company can pay a special dividend when it feels it has too much idle cash on its balance sheet. Randstad currently has a little over €200 million in cash, so it is not exactly in the position to hand out €200 of excess cash. Mr. Schirmer let us understand the company can increase its leverage ratio a bit, so it will issue a bit of debt to fund this program. With interest rates rising, it is not the move I'd prefer, but, as I said, given Randstad's solid position, I can accept it for now.
Regarding the outlook for this year, Randstad too reported a softened economic environment across its markets which led to lower hiring activities. This slowdown continued into 2023 and Randstad's January organic revenue was modestly down year-over-year. We will see if this will lead to margin compression or if the company is carefully managing its headcount and its costs to keep its profitability at the top of the industry. Mr. Schirmer talked a bit about headcount coming down, but that is offset by wage inflation.
Overall, I still see Randstad N.V. as the better pick in the industry. However, the stock has had a big recovery in the last few months and it is now trading above €60 the upside has shrunk. With a weaker guidance, I don't think this is the right moment to add. I personally recently took my gains on the stock and I put it back on my watchlist to see if it trades down and becomes more attractive. Trading close to a 12 P/E and at a P/FCF of 10, it is on the threshold of being expensive for a stock in such an industry. This is why I revise my Randstad N.V. rating to hold, from the buy I previously had.