Monster.com vs. LinkedIn

With two million plus Americans looking for work there’s at least one bright spot in the economy: job services.

There are two factors at play here. First, high levels of unemployment means a growing number of job seekers are signing up for these services. That gives job services sites bargaining power with advertisers who pay to grab clicks from the swelling pool of hopeful workers.

It also makes it much more difficult for hiring managers to find the right candidate for the few positions they’re looking to fill. It used to be a manageable process for internrnal HR teams. But now they’re swamped by applications, many of which are completely unqualified for the position in question, so it’s nearly impossible to do the work alone. That’s why they turnrn to job services companies for help.

So how are these companies performing in this difficult job market? Well, Monster.com is suffering… and LinkedIn is soaring. Take a look:

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Since last March, LinkedIn has mounted a 61% gain in its stock price. Monster.com has dropped 51% in the same time frame.

That’s a big difference between two companies in the same industry. And it doesn’t seem to make much sense.

Looking at revenue, Monster.com brought in $73.4 million last quarter – more than three times more than LinkedIn earnrned. So that doesn’t explain LinkedIn’s stellar performance.

Monster.com also has a far better profit margin than LinkedIn, at 8.1% versus 2.2%. So again, it seems Monster’s stock should be doing much better than it is.

Finally, Monster.com is trading at just 8-times earnrning (otherwise known as P/E ratio or how many dollars in stock price you have to pay for the company’s $1 in earnrnings). Meanwhile, LinkedIn looks insanely expensive with a P/E ratio of 844!

Despite these metrics, LinkedIn’s stock is clearly favored right now. It seems the “social” aspect of LinkedIn’s business model is winning over job seekers, hiring managers and investors.

Don’t take the bait though – just because LinkedIn is popular right now doesn’t mean it’s a good investment. Paying $844 for $1 in earnrnings should bring back bad, reckless memories of the dot.com days.

You’re better off using LinkedIn to network… not to pad your investment account.

If you haven’t done so already read the Survive & Prosper issue on “Who Would You Rather See Get the Cash?

 

 

Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.