Why the SEEK Limited share price is heading to 52-week highs today

The SEEK Limited (ASX: SEK) share price is at 52-week highs of $17.57 today after the business provided a trading update and reconfirmed its earnings guidance for the full year ending June 30, 2017.

The owner and operator of multiple online jobs portals around the world reconfirmed its full year guidance for between $215 million to $220 million in net profit, before deducting investments in early stage growth opportunities

SEEK also confirmed that its fast-growing Chinese jobs website Zhaopin had another strong quarter as it continues to look to take its China business fully private, with the financial backing of China-focused private equity partners.

Excluding the investments in start-up digital businesses in mainly emerging markets, SEEK is expecting another strong year of profit growth to follow up on the 14% underlying profit growth it delivered in FY 2016.


Much of the bull case around SEEK shares is tied to its growth prospects in the large and fast-growing jobs markets of China, South East Asia, Brazil and Mexico, although its Australian jobs business remains perhaps the standout performer.

Moreover, the business says it is now seeing the first signs of success of investments it is making in building out its recruitment platforms into wider networking, social, and human capital management platforms in an attempt to counter the network effect of U.S. jobs juggernaut LinkedIn Corp.

There’s no doubt that LinkedIn and other rivals such as pose a market share threat to SEEK, but the Melbourne-based company has plenty of growth levers to pull thanks to its own dominance. Employers seeking candidates are also still more than willing to advertise with SEEK over rivals thanks to the network effect it has in attracting job applicants across the white and blue collar sectors.

Thanks to its founder-led management team and global growth prospects, I still like SEEK as an investment prospect, despite the fact its competition is increasing. I’m not so keen on its current valuation at $17.48 per share though, which is around 26x analysts’ estimates for full year earnings of 66 cents per share.

Still, SEEK looks one of the rare high-quality tech businesses on the ASX with long track records of growth and an experienced management team. I would have it on the watch list along with the likes of REA Group Limited (ASX: REA), as a share price pull back would be an opportunity to buy in my opinion.

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Motley Fool contributor Tom Richardson owns shares of SEEK Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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