LSE:STEM

Stock Analysis Report

Executive Summary

SThree plc provides permanent and contract specialist staffing services for information and communication technology, banking and finance, energy, engineering, and the life science sectors.

Rewards

Trading at 43.6% below its fair value

Earnings are forecast to grow 4.78% per year

Earnings grew by 20.6% over the past year

Pays a high and reliable dividend of 4.27%

Risk Analysis

No risks detected for STEM from our risk checks.


Snowflake Analysis

Outstanding track record with flawless balance sheet and pays a dividend.


Similar Companies

Share Price & News

How has SThree's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: STEM has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

-7.1%

STEM

0.3%

GB Professional Services

-0.2%

GB Market


1 Year Return

17.2%

STEM

24.5%

GB Professional Services

6.1%

GB Market

Return vs Industry: STEM underperformed the UK Professional Services industry which returned 24.5% over the past year.

Return vs Market: STEM exceeded the UK Market which returned 6.1% over the past year.


Shareholder returns

STEMIndustryMarket
7 Day-7.1%0.3%-0.2%
30 Day2.1%4.0%-1.8%
90 Day25.4%12.6%4.0%
1 Year23.1%17.2%27.4%24.5%11.8%6.1%
3 Year27.7%11.4%57.9%47.3%17.5%2.6%
5 Year42.8%14.5%110.5%85.8%34.8%3.7%

Price Volatility Vs. Market

How volatile is SThree's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is SThree undervalued compared to its fair value and its price relative to the market?

43.6%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: STEM (£3.59) is trading below our estimate of fair value (£6.36)

Significantly Below Fair Value: STEM is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: STEM is good value based on its PE Ratio (11.3x) compared to the Professional Services industry average (21.3x).

PE vs Market: STEM is good value based on its PE Ratio (11.3x) compared to the UK market (18.5x).


Price to Earnings Growth Ratio

PEG Ratio: STEM is poor value based on its PEG Ratio (2.4x)


Price to Book Ratio

PB vs Industry: STEM is overvalued based on its PB Ratio (4x) compared to the GB Professional Services industry average (3x).


Next Steps

Future Growth

How is SThree forecast to perform in the next 1 to 3 years based on estimates from 7 analysts?

4.8%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: STEM's forecast earnings growth (4.8% per year) is above the savings rate (0.5%).

Earnings vs Market: STEM's earnings (4.8% per year) are forecast to grow slower than the UK market (12.2% per year).

High Growth Earnings: STEM's earnings are forecast to grow, but not significantly.

Revenue vs Market: STEM's revenue (3.3% per year) is forecast to grow slower than the UK market (3.4% per year).

High Growth Revenue: STEM's revenue (3.3% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: STEM's Return on Equity is forecast to be high in 3 years time (26.7%)


Next Steps

Past Performance

How has SThree performed over the past 5 years?

13.6%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: STEM has high quality earnings.

Growing Profit Margin: STEM's current net profit margins (3.1%) are higher than last year (2.7%).


Past Earnings Growth Analysis

Earnings Trend: STEM's earnings have grown by 13.6% per year over the past 5 years.

Accelerating Growth: STEM's earnings growth over the past year (20.6%) exceeds its 5-year average (13.6% per year).

Earnings vs Industry: STEM earnings growth over the past year (20.6%) exceeded the Professional Services industry 16%.


Return on Equity

High ROE: STEM's Return on Equity (35.4%) is considered high.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is SThree's financial position?


Financial Position Analysis

Short Term Liabilities: STEM's short term assets (£286.1M) exceed its short term liabilities (£186.9M).

Long Term Liabilities: STEM's short term assets (£286.1M) exceed its long term liabilities (£1.4M).


Debt to Equity History and Analysis

Debt Level: STEM's debt to equity ratio (3.9%) is considered satisfactory.

Reducing Debt: STEM's debt to equity ratio has reduced from 46.8% to 3.9% over the past 5 years.

Debt Coverage: STEM's debt is well covered by operating cash flow (886.2%).

Interest Coverage: STEM's interest payments on its debt are well covered by EBIT (62.9x coverage).


Balance Sheet

Inventory Level: STEM has a low level of unsold assets or inventory.

Debt Coverage by Assets: STEM's debt is covered by short term assets (assets are 63x debt).


Next Steps

Dividend

What is SThree's current dividend yield, its reliability and sustainability?

4.27%

Current Dividend Yield


Upcoming Dividend Payment

Purchase SThree before the 'Buy Limit' to receive their next dividend payment.


Dividend Yield vs Market

company4.3%marketbottom25%1.8%markettop25%5.1%industryaverage2.0%forecastin3Years4.5%

Current dividend yield vs market & industry

Notable Dividend: STEM's dividend (4.27%) is higher than the bottom 25% of dividend payers in the UK market (1.83%).

High Dividend: STEM's dividend (4.27%) is low compared to the top 25% of dividend payers in the UK market (5.1%).


Stability and Growth of Payments

Stable Dividend: STEM's dividends per share have been stable in the past 10 years.

Growing Dividend: STEM's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (48.1%), STEM's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: STEM's dividends in 3 years are forecast to be well covered by earnings (48.3% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

3.5yrs

Average management tenure


CEO

Mark Dorman (48yo)

0.9yrs

Tenure

0

Mr. Mark Dorman has been Chief Executive Officer and Executive Director of SThree Plc since March 18, 2019. He served as President of Higher Education, Professional & International at McGraw-Hill Global Ed ...


Leadership Team

NamePositionTenureCompensationOwnership
Alex Smith
CFO & Executive Director11.8yrsUK£813.10k0.31% £1.4m
Mark Dorman
CEO & Executive Director0.9yrsno data0.0032% £14.9k
David Rees
Chief Sales Officer3.1yrsno datano data
Morgan Kavanagh
Managing Director of USA3.8yrsno datano data
Simon Chilley
Head of Learning & Development0yrsno datano data
Timo Lehne
Managing Director of DACH3.1yrsno datano data
Kurt Schruers
Managing Director of Europe excluding DACH Region0yrsno datano data
Steven Hornbuckle
Group Company Secretary & Executive Director0yrsno datano data
Sarah Anderson
Deputy Company Secretary0yrsno datano data
Kirsty Mulholland
Senior Company Secretary Assistant0yrsno datano data

3.5yrs

Average Tenure

49.5yo

Average Age

Experienced Management: STEM's management team is considered experienced (3.5 years average tenure).


Board Members

NamePositionTenureCompensationOwnership
Alex Smith
CFO & Executive Director11.8yrsUK£813.10k0.31% £1.4m
Mark Dorman
CEO & Executive Director0.9yrsno data0.0032% £14.9k
Steven Hornbuckle
Group Company Secretary & Executive Director0yrsno datano data
Barrie Brien
Non-Executive Director2.4yrsUK£45.00kno data
Denise Collis
Senior Independent Director1.3yrsUK£52.00k0.0039% £17.9k
James Bilefield
Chairman1.8yrsUK£104.40k0.0078% £35.9k
Anne Fahy
Non-Executive Director4.3yrsUK£52.00k0.0031% £14.3k

2.1yrs

Average Tenure

53yo

Average Age

Experienced Board: STEM's board of directors are not considered experienced ( 2.1 years average tenure), which suggests a new board.


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

SThree plc's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: SThree plc
  • Ticker: STEM
  • Exchange: LSE
  • Founded: 1986
  • Industry: Human Resource and Employment Services
  • Sector: Commercial Services
  • Market Cap: UK£459.726m
  • Shares outstanding: 128.24m
  • Website: https://www.sthree.com

Number of Employees


Location

  • SThree plc
  • 75 King William Street
  • 1st Floor
  • London
  • Greater London
  • EC4N 7BE
  • United Kingdom

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
STEMLSE (London Stock Exchange)YesOrdinary SharesGBGBPNov 2005
STRE.FOTCPK (Pink Sheets LLC)YesOrdinary SharesUSUSDNov 2005

Biography

SThree plc provides permanent and contract specialist staffing services for information and communication technology, banking and finance, energy, engineering, and the life science sectors. It offers permanent, contract, project, retained, and executive search recruitment solutions, as well as support and mobility services. The company offers its services under the Computer Futures, Progressive, Huxley Associates, Real Staffing Group, Enterprise Partners, JP Gray, Madison Black, Newington International, and Orgtel brands. It has operations primarily in the United Kingdom and Ireland, Continental Europe, the United States, and the Asia Pacific and the Middle East. SThree plc was founded in 1986 and is headquartered in London, the United Kingdom. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/02/16 20:56
End of Day Share Price2020/02/14 00:00
Earnings2019/11/30
Annual Earnings2019/11/30


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.