Shares of HeadHunter Group (NASDAQ:HHR), just one of Russia’s biggest non-oil creating firms, are down approximately forty% considering the fact that February. The on line recruitment organization is just one of the 3 Russian firms traded on the U.S. major inventory exchanges, together with Cellular Telesystems (NYSE:MBT) and Michael Pao (NYSE:MTL).

HeadHunter’s situation

Headhunter is Russia’s biggest on line recruitment platform and ranks 3rd globally in terms of site visitors. The organization was cleared final month of monopolistic practices in the country right after the Antitrust Agency concluded that its steps did not limit all round level of competition in Russia’s on line recruitment current market.

1 of HeadHunter’s major strengths, which is also its business moat, is that locally, it seems to keep a powerful situation in terms of current market share. The company’s regional site visitors is so high that it has pushed it to 3rd globally in the on line recruitment place. Nonetheless, it even now lags various techniques again in terms of income.

The likes of In fact.com are counting billions in their leading-strains, when various other U.S. on line recruitment firms are into hundreds of tens of millions. HeadHunter has a very long way to go to bridge the intercontinental gap as it bids to expand its world-wide revenue stream.

The company’s gigantic site visitors could be a good beginning issue. All it requirements to do is introduce the essential technological attributes to monetize its site visitors. It could do so by tweaking its infrastructure to encompass extra purchaser-centric attributes that offer extra than just recruitment solutions.

Level of competition in innovation

Some of the world-wide competition like U.S.-based mostly Robert Half Global (NYSE:RHI) and ManpowerGroup (NYSE:Guy) have expanded their services choices to incorporate intuitive employee info analytics, which gives businesses with extra insights about the particular person that they are about to add to their employees. Nonetheless, it could be a when ahead of HeadHunter can achieve that degree.

At the regional degree, HeadHunter is also facing level of competition from EU-based mostly up and coming tech startups that have proven an insatiable urge for food for innovation. 1 such organization is Poland-based mostly TenderHut, an IT powerhouse that invests in technological infrastructures for diverse industries. 1 of this company’s most appealing models is Increase Uperion, a startup running in the HRTech sector. TenderHut is leveraging its various technologies portfolio in HR to establish a clever on line recruitment platform that will target on psychology, drive and training.

These are some of the developments that HeadHunter could look to introduce to its platform to try out to contend globally. Headquartered in Bialystok, TenderHut is just one of the closest regional rivals that HeadHunter will experience in the aged Soviet location all the way to Scandinavia. Another of TenderHut’s subsidiaries, SoftwareHut, was recently ranked 33rd in the Economic Times’ Top 1000 European firms. The organization has now expanded to 10 world-wide markets, which saw its revenue expand by 3,090% from 2015 to 2019.

HeadHunter could look at some of the technologies employed by HRTech to make improvements to its products choices. This could be a good platform to make on as it targets to extend world-wide achieve.

Quick and very long-phrase futures

The company’s revenue generally will come from subscriptions, which helps make it comparatively predictable. In the 3 months finished Dec. 31, 2019, the organization documented a revenue of $33.4 million, up 22.8% from the past period of time.

Headhunter’s adjusted web income of $11.5 million for the period of time mirrored an improve of forty four.two%. The company’s leading and bottom strains have managed significant growth premiums considering the fact that likely community and this was mirrored on the comprehensive-calendar year final results. Final year’s whole revenue of $125.8 million mirrored a growth of 27.3%, when adjusted web income of $38.9 mirrored an improve of 56.six% from 2018.

The company’s leading line and bottom line growths are driven mainly by domestic revenue from Russia, which accounted for 92.six% of the all round income in 2019, publishing a growth of 26.5%.

For the very long phrase, note that HeadHunter went community in the U.S. at the NASDAQ inventory exchange final May possibly. This means that the company’s community lifestyle in the U.S. is even now in its infancy. It is yet to total the really unpredictable to start with calendar year, which means that investors really should tactic with a significant diploma of warning.

In addition, if HeadHunter is to turn into competitive at a world-wide degree, then it will require to do the job extra on the monetization of its site visitors. The company’s revenue of $125.8 million is massively dwarfed by most of its world-wide competition. Up and coming tech startups that look to disrupt the place, led by firms like TenderHut, could also get started to try to eat on HeadHunter’s share of the regional current market in Europe.

Summary

In summary, shares of HeadHunter are down approximately forty% considering the fact that February, which helps make it a probable opportunity supplied that the organization showed substantial growth in the leading line and bottom strains final calendar year.

The recent plunge now values the company’s shares at a selling price-earnings ratio of 41.sixty two, when the forward twelve-thirty day period selling price-earnings ratio is 17.33. This could change when earnings for Q1 2020 are launched, supplied the adverse effects of Covid-19, which have brought on world-wide lockdowns and unidentified figures of position losses.

Disclosure: No positions.

Read extra here:

Not a Premium Member of GuruFocus? Signal up for a free seven-day trial here.

About the creator:

Nicholas Kitonyi

Nicholas is the founder of CAGR Price. He is a fiscal analyst with substantial practical experience in expense exploration and inventory current market analysis. His analysis has been showcased on various exploration web pages.

Nicholas has solid understanding of the two U.S. and European markets. His expense design and style is focused on undervalued plays and growth shares. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE a hundred, amongst other liquid devices.

Stop by Nicholas Kitonyi’s Internet site