The Seek Limited (ASX: SEK) share price has grown by 182% over the last five years and I think it could keep going higher over the next five years too.
Seek is the owner of the largest job portal in Australia, Seek.com.au. Here are three reasons why I think it could be a good long-term buy:
Market leading position
Seek is the leading job portal website by a clear margin. Being the biggest attracts the largest pool of jobseekers which in turn attracts the most employers. It is a virtuous circle that helps Seek remain number one.
Seek already has the technological infrastructure set up for employers and employees, so most revenue growth falls straight to the bottom line. As long as Seek can keep growing its number on jobs advertised on the website then it has a rosy future.
International growth
There's a lot more to Seek than its Australian segment. It also owns Seek Asia and has a large stake in Zhaopin.
Zhaopin is an exciting opportunity for Seek, it's the largest job site in China. There's over a billion people in China so that's a much larger addressable market for Seek. In its half-year result to 31 December 2016, Zhaopin grew revenue by 23%. In a few years it could be the most important part of Seek's business.
Diversification
Seek is making the strategic move of diversifying its earnings away from just job advertising.
Another segment to Seek's business is Seek Learning. As the name suggests, it offers education and courses for students wishing to study.
Diversifying earnings is a good idea in itself as a way to grow revenue. Education courses could be less volatile than the job market as people would likely want education on a more consistent basis.
Risks
Competitors are always a risk in any business. LinkedIn and Indeed want to take Seek's market share. As long as Seek hangs onto the top spot then it should always receive employers and job applicants.
A recession could particularly hurt Seek more than most. Potential jobs usually dry up in a downturn so Seek could suffer a lot in that scenario.
Foolish takeaway
Seek is currently trading at 25x FY18's estimated earnings with a grossed-up dividend yield of 3.46%. This might be too expensive for some investors.
I don't own Seek shares yet but I think it would be a good long-term buy. When Australia (or China) next has a downturn it could be an even better opportunity to buy Seek shares.
