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The lesser-known FTSE 250 recruitment company Page Group (LSE: PAGE) is down 26% this year after weak fourth-quarter results hit the stock hard. Growing uncertainty in the UK jobs market has led the firm to suffer its worst start to a year since 2022. Now at 250p a share, it’s worth less than half what it was at the end of 2021.
In its latest results released this Wednesday (9 April), it reported an 11.7% drop in gross profit, down from £220m to £194.2m. The EMEA region was hit the hardest, down 14.5%, with the UK dipping 12.7% and America down 1.1%.
The company noted the unpredictable economic environment that could make 2025 a difficult year. As a result, it didn’t provide any forward-looking guidance at this time. However, it does plan to implement cost savings of £15m by simplifying its management structure and reducing the workforce by 25%.
Page Group’s earnings have been in decline for several years now, slipping from £139m in 2022 to £28.4m last year. While revenue has also dropped, it’s done so at a slower rate, bringing the company’s net margin down to a worrying 1.39%.
Notably, earnings in the US increased 7% due to higher demand in the engineering and manufacturing sectors.
A dividend play?
Page Group has a long history of dividend growth, barring an understandable cut during Covid. Global lockdowns led to an almost complete cessation of recruitment operations during that period.
However, in 2021, dividends were reinstated at 15p per share and have since increased to 17.11p. Overall, its annual dividends have increased at a compound annual growth rate of 5.2% a year. I would expect that growth to continue — unless more lockdowns occur, of course.
After the price dip, the yield’s up to 7%, making the stock an attractive option for income investors. However, if the price keeps falling, it may negate any dividend gains.
What’s the likelihood of that happening?
Valuation
Along with the falling price, Page Group’s price-to-earnings (P/E) ratio has also dipped by around 25%. However, now at 29.6, it’s still well above the FTSE 100 average of 11.4. At 9.63, its price-to-cash flow (P/CF) ratio is also slightly above average. These metrics indicate that, despite the falling price, the stock could still be somewhat overvalued.
Subsequently, there’s a fair chance the price may dip lower before stabilising or recovering. But analysts remain optimistic in the long term, with the average 12-month forecast 380p — a 44% rise. The current economic situation is dire but will likely stabilise and improve by next year. If the company can maintain its dividends through it all, it could deliver decent value to shareholders in the long run.
However, I’m not convinced enough to consider the stock just yet. Looking at other similar stocks on the FTSE 250, I’d consider price comparison company MONY Group to have better potential. It has a 6.5% yield and a P/E ratio of only 12.45. Specialist manufacturer Morgan Advanced Materials also looks promising, with a 6.6% yield and P/E ratio of 10.5.
