Is it worth buying any shares at the current SEEK Limited (ASX: SEK) share price?
The Australian employment giant made its presentation at the Macquarie Group Ltd (ASX: MQG) conference today and gave trading and guidance update.
Aside from re-iterating its strengths and strong track record of growth, it was the guidance that may get investors moving tomorrow.
The company reminded investors that it has market leadership in 18 countries with exposure to around 2.9 billion people and approximately 26% of the global GDP.
However, SEEK’s continuous investing in long-term ideas is causing short-term profit growth to be subdued, but the company is also seeing slowing market conditions.
SEEK said that it continues to see a slowdown in macro conditions in a number of its key markets which has resulted in “an easing of ad volume and billing growth.” The guidance which I am going to refer to below assumes no further material deterioration in any of its key markets.
The company said because of the new education deals, and momentum in its existing investments where it is investing more heavily, the FY19 losses from ‘Early Stage Ventures’ (ESV) has increased above the previous guidance range of $40 million to $45 million.
SEEK reaffirmed revenue growth in the range of 16% to 20%, earnings before interest, tax, depreciation and amortisation (EBITDA) growth will be in the range of 5% to 8%, and reported net profit after tax (NPAT) will now be “moderately” below FY18’s NPAT. SEEK again attributed this result to the ESV investments and transaction funding costs.
I’m unsure whether the fact that SEEK is investing so much is a good thing or perhaps a bad thing. It might say SEEK needs these other businesses to generate growth, or you could say that all of the investments are just a bonus on top of SEEK’s existing businesses and the company can expand into other areas.
I would rather own one of these top ASX shares over SEEK because of the flat profit prospects.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK Limited. 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 Scott Phillips.