Recruiters like SThree (LSE: STEM) are vulnerable to economic cooldowns like this. In theory, demand for their services should fall as corporate confidence sinks.
So far however, these businesses are still thriving. A chronic jobs shortage means net fees are soaring, as blockbuster results today from Robert Walters show.
Net fees at the firm soared 26% year-on-year between April and June. Fees were also the highest second-quarter number on record and prompted Robert Walters to lift its full-year profits forecast.
SThree’s no stranger to lifting its own earnings estimates either. In mid-June, it raised forecasts after announcing a 25% jump in net fees in the first half, to £203.1m. Critically, the small-cap said it witnessed “very strong” growth in its German, US and Dutch markets too.
A top stock for the tech age
I like SThree in particular because of its focus on the STEM (Science, Technology, Engineering and Mathematics) sectors. These are poised for strong growth over the long term as areas like healthcare, renewable energy, automation and the Internet of Things continue to evolve.
In the meantime, City analysts are confident the company should continue growing earnings despite rising economic headwinds. Increases of 9% and 8% are forecast for the financial years to November 2022 and 2023 respectively.
At current prices, these forecasts leave SThree trading on a forward price-to-earnings (P/E) ratio of around 10 times. Such a low valuation comes despite the firm’s impressive resilience so far. I’d use recent share price weakness as a buying opportunity.
5.6% dividend yields
Urban Logistics REIT (LSE: SHED) is another dirt-cheap UK share on my radar. I like this particular stock because it offers terrific value from both a growth and earnings perspective.
The property stock trades on a forward price-to-earnings growth (PEG) ratio of 0.8. A reminder that any reading below 1 suggests that a stock is undervalued.
Meanwhile, Urban Logistics carries meaty dividend yields of 5% and 5.6% for the next two financial years.
A red-hot property share
Urban Logistics invests in big-box warehouse and logistics assets which are critical in an age where e-commerce is growing sharply. In fact, supply of these properties in Britain remains low while demand is ripping higher, driving rental income at firms in this area to the stars.
Helped in part by recent acquisitions, rental income at Urban Logistics soared 59.8%, to £36.5m, in the 12 months to March. Latest financials also showed the value of its properties grow 25.4% on a like-for-like basis to £153m.
An acquisition-led growth strategy can leave a company open to risks like unexpected costs. But I’m encouraged by the excellent track record Urban Logistics has on this front.
City analysts think earnings here will rise 25% in this financial year to March 2023 and 9% next year too. And I expect the business to deliver strong and sustained profits growth over the long term too.
