Valued at $5.7 billion, SEEK Limited (ASX: SEK), operates the largest online marketplace for employment adverts globally with operations in 14 countries. It's rare for an Australian company to become a true global leader in its field but SEEK has done just that, proving to be outstandingly successful and profitable in its online businesses.
While the high earnings multiple and sky high share price performance may put off some from investing in SEEK, there are a number of reasons to view the pricing as reasonable given the group's outlook.
Here are five reasons SEEK remains a top stock.
Proven ability to undertake successful M&A. Mergers and acquisitions (M&A) have been a feature of SEEK's global expansion. According to management the group has achieved a 400% return on investment from its M&A activities.
Domestic operations continue to excel. SEEK Employment and SEEK Education facilitate 22% of job placements in Australia and in FY 2014 helped 55,000 students find courses, respectively.
International growth provides massive opportunity. SEEK's International division provides the company with exposure to over 2.5 billion people and over 20% of global GDP. In total, SEEK's international sites receive over 325 million visits with job seekers viewing over 3 million job ads each month. The international business clearly has the potential to offer a long growth runway to the group.
Proven past outperformance is a good sign for the future. While history may not repeat itself, in SEEK's case it may look similar! The title of being a "top stock" is warranted in the case of SEEK judging by its total shareholder returns (TSR).
In the year to 18 August 2014, TSR (which includes dividends and share price appreciation) was 78.8%. The five-year TSR was 298.6% and the TSR since SEEK's IPO in April 2005 is a whopping 776.7%. In contrast, the TSR from the S&P/ASX 200 (Index: ^A XJO) (ASX: XJO) has been 14.1%, 58.4% and 108.2%, respectively.
Above average growth rates. In the past five years, the group has achieved a compound average growth rate per annum in dividends and earnings per share of 26% and 19% respectively. While naturally such fast rates of growth will have to slow at some point in the future, investors can reasonably expect growth rates well above inflation to continue for some time yet.
