Share tip: SThree is just the job for the Stem tide
27th November 2022
It might seem ludicrous to back a recruiter specialising in technology jobs, at a time when the largest tech businesses have just axed 120,000 roles worldwide. Yet while hiring might be low on the agenda in Silicon Valley, the average company is still pushing a digital agenda.
From schools to shops, healthcare to fitness, consumers want more services from apps and websites. And so, despite the economic backdrop, firms are still investing in tech.
Step forward SThree. Shares in the recruitment firm, which specialises in Stem (science, technology, engineering and maths) roles, have been swept downstream this year (if not as much as rivals) amid the sentiment that inflation and recession are bad for recruitment.
SThree has lost almost a third of its value in the past year: from a share-price peak close to £6 last autumn, it’s now about £4.
But two factors make SThree stand out. The first is its emphasis on science and tech; both sectors are growing much faster than the wider economy, and skills shortages are at record levels.
“SThree hires for a very broad range of firms facing disruption from the changing world,” said Adrian Kearsey at broker Panmure Gordon. He thinks recession could spark more interest in those roles: “The harder the world gets, the more employers need the people SThree provides. High street banks, for instance, will need to improve their digital platforms and cybersecurity. And governments won’t say, ‘We’ll take our chances with rising sea levels.’ The dynamics behind SThree … get stronger each year.”
The firm’s emphasis on flexible contract work rather than full-time roles is its second distinctive feature. Contracting is vital in a recession, when firms are less willing to commit long-term.
During the pandemic, when rivals saw swathes of their business evaporate, SThree’s net fees slipped rather than sank. Subsequently, at its trading update in September, the order book was up 24 per cent on last year.
The recruiter also spreads risk geographically: from a City HQ, it has 40 offices in 15 countries. Three-quarters of revenues come from Germany, the US and Holland, where net fees were up 13, 9 and 36 per cent respectively in the last quarter.
SThree has a decent balance sheet, too, with net cash of £57 million and almost double that in working capital. Its price to earnings ratio is just 9, when historically it’s closer to 13.
The market may have gone off hiring, but Stem-focused SThree isn’t a bog-standard recruiter — its cheap value is an opportunity to buy.
Author: Lucy Tobin
Director, Research Analyst, Construction & Support Services