There are still job losses every month recently from different industries like mining, manufacturing and air travel creating a feeling of uncertainty. Yet the economy is showing signs of growth, for example, with rising GDP growth and increases in job ads.
This is a time when markets are in a state of change and the path for the next few years may not be clear. The trend is upward though, so investors who wait for conditions to be perfect to invest will have to pay premium prices since financial markets are always forward looking.
Some industries will perform better than others, so you still need to know about companies rather than take a blind stab at industry exposure.
With a stronger economy, you would expect employment to build up steadily, so Skilled Group Ltd (ASX: SKE) would be a good start. It provides staffing solutions to the public and private sectors. This can be skilled labour for professional trades as well as healthcare, project management and maintenance services. It operates internationally with 100 local and regional branches.
Since 2012, its share price has been trending up and its dividend yield is 5.8%. Its PE is 11, which is in the middle of its past average PE range.
Annual earnings per share have more than doubled since FY2010 and revenue has been stable. The mining pullback affected its first-half FY2014 results, yet it is seeing growth in work within the oil and gas industry. That could offset it while the general economy picks up.
Programmed Maintenance Services Limited (ASX: PRG) also provides staffing, maintenance and project services and operates 100 branches in Australia and New Zealand. Both annual revenue and underlying net profit have been growing steadily over the last three years.
Since January 2013, its share price climbed from about $1.50 to $2.85 currently, coming off a peak of about $3.50 in early January 2014. It has a PE of 10.5 and its dividend yield is 5.5%.
In the first half of FY2014, revenue was down 5%, yet net profit was up 1%. Effects of the mining pullback are still at work. The company is seeing more opportunities in the oil and gas industry, so we will have to watch the progress. The company projects a full year result of net profit similar to FY2013.
Foolish takeaway
Both companies are working in similar business environments. Performance ratios like return on equity, capital and investment for Skilled Group are higher. Over a long-term perspective, I would prefer Skilled Group.
