Hudson Global (HSON)provides permanent recruitment, contract consulting,
recruitment outsourcing, interim management, and professional contact staffing
services. Offices are in 20 countries throughout Europe, Asia-Pacific and the
Americas. Hudson Global founded in 2003 is based in New York City.
After reviewing 33 staffing companies I’m encouraged that
HSON (Hudson Global) is positioned to outperform its industry peers over next 1
to 3-year period. Another potential mean reverting industry peer is Volt
Information Sciences (VISI). One reason for ignoring VISI on this post is perceived
operational risks. Volt still offers significant turnaround opportunity trading
near its 52 week and 5 year price low.
Now back to HSON, the opportunity exists to buy cheap shares based
on favorable historical and industry relative valuation. Further, the most recent
reported results show a turnaround emerging.
The second quarter (June 30, 2016) revenue reported 113M is at the upper end of guidance. Strong dollar impacted revenue negatively by 5M,
sale of two businesses 9M. Revenue is up 4% YOY on a retained and constant
currency basis, 1% increase for gross profits.SGA is down 8% from last year in constant currency excluding
the 2.5M arbitration settlement. Further, excluding arbitration costs financial
results are above breakeven. Last, 582,000 of Hudson shares purchased during the
second quarter at a cost of 1.4 million. The stock buyback program started in
August 2015 through July 27 purchasing 1.70M shares at a cost of 4.2 million.
Hudson Global trades at EV/Sales of .10, lowest for the 33
companies reviewed. HSON return is industry’s
worst over 5 years at -16.90% annualized, 2nd worst over 3 years at -16.60% , and
-35.53% for the past 52 weeks. P/B of
1.20 is the industry 4ths lowest. The current stock price is ~ 3% off 52 low
and 44% down from 52-week high.
The low valuations have attracted value institutions, HEARTLAND at
11% of shares outstanding, LONE STAR VALUE 8%, POLAR ASSET MANAGEMENT 5%, and
others. Further positive attributes for
a future higher stock price is reduction of shares in the float (see table below).
Note reduction in Float
