Put Some Manpower to Work

When markets start picking up quickly, it often pays to play with stocks that have not yet participated in the upturn. I began playing Manpower Group again this week as its shares slipped back from north of $125 in February to about $88 as of May 26, 2022. The firm has a decent long-term growth record across all major metrics. Better still, its recent pullback has it selling for well under its true value. A nice catch-up move higher appears in the cards. What is Manpower really worth? Its average multiple over the past decade was about 13.8-times, accompanied by around 1.97% in current yield. As of May 26, those figures were 10.3-times its 2022 estimate from Value Line along with a generous 3.09% current payout. Simply reverting to a normalized level supports a year-end 2022 target price of $118.68. Hitting that goal would provide over 35% in total return by Dec. 31. My goal is neither far-fetched nor an upper limit. MAN changed hands at $125.10 just a few months ago. It hit $136.87 early in 2018. At its four should have sold moments (red-starred) MAN fetched between 16-times and 19.6-times forward EPS. Conversely, MAN's previous five best buying opportunities (green-starred) was offered from 8.2-times to 13.3-times earnings. Its present day valuation is very much in that same range today. Manpower's 2016 low came on the heels of the unexpected Brexit vote. It immediately rallied and ran up almost 139% plus dividends from there. The Covid-panic low in March 2020 proved to be another great entry point. EPS declined sharply due to virus-related business shutdowns but the dividend actually went up. Brave souls who bought in spite of very bad news saw greater than 150% gains over the next 12-months. The graphic below updates a previous table I put together detailing the four previous rebounds from low points. Bottom to subsequent tops averaged up 85.3% and took an average of 14- to 15-months to play out. I expect the next rebound, from today's bargain valuation, to be good as well. MAN's price-to-earnings is 22.5% below normal and its yield is now 56.8% above its historical average. Seeking Alpha notes MAN's 28.1% one-year decline which allows us to buy very close to a 2021-2022 nadir. There 2022 estimate for MAN is slightly higher than Value Line's, which could justify better than $122 by year-end. Research outfit Fast Graphs' projects a few cents higher for MAN this year than both Value Line and SeekingAlpha. Based on that Manpower could reach $123 without being more than fairly priced. Those desiring to play Manpower, but wanting an either a lower potential entry point, could be well served by shorting some Dec. 16, 2022 expiration date puts at $85 or $90. Actual pricing on those, with MAN at $88.29, are shown below. In best-case scenarios, you'll see the puts expire worthless. That would leave you with either $920 or $1,150 per 100-share commitment without ever having had to lay out any cash at all. Worst-case, forced purchase prices would drop to just $75.80 or $78.50 depending on the strike price employed. Future stock market action can never be guaranteed. That said, owning MAN at either of the if exercised prices shown would have been a winning position 100% of the time dating back to November of 2020. What more can you ask for? Buy some MAN shares, sell some puts or consider doing both.

Put Some Manpower to Work

As the markets start picking up, let's look at how to play MAN.

Columnist Conversation

Stocks Under $10

Two Good Signs -- Especially for Small-Cap Investors

More Insider Buying in American Woodmark (AMWD)

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.