Globe & Mail Article Investors looking to play Canada's robust and rapidly changing job market might consider People Corp., a Winnipeg-based company providing group benefit, recruitment and other human resources services with ambitious growth plans.
Shares of TSX Venture Exchange-listed People Corp. have risen by about 64 per cent over the past year amid strong revenue growth driven by acquisitions and new business from existing clients. The run-up well surpasses industry peers such as Morneau Shepell Inc., whose shares have advanced about 17 per cent, and Caldwell Partners, whose stock has fallen 9 per cent, over the same 12-month period. (It should be noted that, unlike People, both Morneau and Caldwell pay a dividend.)
People Corp. hit a record high of $7.93 on Dec. 4, the day before it reported a 32.6-per-cent year-over-year increase in revenue in the fiscal year ended Aug. 31, to $105.8-million. The growth was from a combination of acquisitions and gains from existing businesses, the company said.
People Corp. shares have pulled back recently, which analysts say could be a combination of profit-taking as investors reposition their portfolio in the New Year, as well as concerns about benefits being cut back after a 21-per-cent spike in Ontario's minimum wage as of Jan. 1. The stock is also volatile, given that it's a small cap with a total market valuation of about $380-million.
Still, all five analysts who cover the stock have a "buy" recommendation with an average target price over the next year of $8.62, which implies an increase of more than 16 per cent from its current price around $7.40.
"The market really likes their acquisitions," said Macquarie Research analyst Jiang Zhang, who has a price target of $8.75 on the stock. Some of the company's latest deals include buying benefit and pension provider Assurances Dalbec Lt©e, BPA Financial Group Ltd., Sirius Benefit Plans Inc. and Skipwith & Associates.
"Investors like management, they like what management is doing, and the consistent execution track record," Mr. Zhang said in an interview. He likes the company's focus on the growing small-to-medium business market and its aggressive acquisition strategy. "They seem to be the ones most eager to consolidate in that segment of the market," he said.
People Corp. is also well positioned to respond to the growing demand, over all, for employee benefit programs and recruitment services amid a strong job market and changing work force demographics. "The demographic shift within the labour force towards the millennial and the post-millennial segment is demanding an increased level of customization which favours solutions providers such as People Corp. that have both scale and expertise to address this demand," Mr. Zhang said in a recent note.
Cormark Securities analyst Gavin Fairweather lists People Corp. as a "top pick" with an $8.25 price target.
"With a strong organic growth profile, healthy and expanding margins, ample dry powder for [mergers and acquisitions] and a solid track record of execution, People Corp. continues to tick all of our boxes," Mr. Fairweather said in a note. "We expect the combination of market share gains and an accelerating consolidation to drive substantial shareholder value over time."
Risks for the company include integrating its acquisitions, an economic downturn that could affect its clients' hiring and, ironically, finding skilled employees for its own operations.
People Corp. chief executive Laurie Goldberg says finding the right talent is the company's top challenge, especially given how fast it's growing. The company, which has about 700 employees in 35 offices across nine provinces, is planning to hire about 100 additional staff this year.
"I know it sounds crazy for an HR firm to say that," Mr. Goldberg says about the hiring challenges. "It's about finding that talent that's the right fit with the right skill set."
Part of the company's acquisition strategy is to hire top talent in the industry, as well as to expand and reinvest in the business. People Corp. has acquired 15 companies since it was founded in 2009, Mr. Goldberg says, at a pace of about one or two deals a year.
"For us, acquisitions are really a way to gain scale and expertise," he says.
Ryan Modesto, CEO at independent research company 5i Research, believes the company has been "pretty responsible" with acquisitions to date.
"They aren't growing for the sake of growth. They're still generating value from the bottom line," says Mr. Modesto, whose company holds the stock in its model growth portfolio.
He says the stock isn't cheap, trading at about 15 times enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA) - a common valuation metric - but not expensive either, especially given the growth prospects.
"You are getting a quality high-growth company for an okay valuation, we think," Mr. Modesto says.
Mon, 15 Jan 2018 17:53 EST