Hudson Global, Inc.: provides talent solutions for mid-to-large cap multinational companies and government agencies
At Perritt Capital Management, we take focused positions in companies where we have a high conviction in their success; companies that are out of the mainstream of small cap investing. To highlight our process, we are pleased to present the newest installment in our new series “Marvelous Microcaps – Big Ideas on Small Companies.” This series profiles companies that we believe have a niche in their existing markets or are launching a product that could disrupt their marketplace.
Hudson Global, Inc. (HSON) provides customized recruitment process outsourcing (RPO) and total talent solutions to companies worldwide. The company operates in Asia Pacific (70% of 2021 revenues), the Americas (17%), and Europe (13%). RPO is a business model where a company outsources the management of the recruitment function (in whole or in part) to a third-party expert to drive cost, quality, efficiency, service, and scalability benefits.
HSON developed Project RPO to respond to their clients quickly with the ability to fill job roles in less than 30 days. Timely and cost-effective, the average recruitment outsourcing project may be implemented in as little as a few weeks and typically lasts between three to twelve months.
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HSON report their first quarter 2022 earnings per share of $0.97 which exceeded the $0.30 estimate. They earned $1.07 in 2021 and are anticipated to earn $3.24 in 2022 while trading at 11.1x earnings. HSON has marked a strong return after the pandemic by growing revenue 50.6% annually. They have used free cash flow for share repurchases and acquisitions. The October 2020 purchase of Coit Group and November 2021 acquisition of Karani, LLC represent adding complementary service offerings and expanding globally.
Hudson’s key strong point is its exclusive focus on the RPO market over the last couple of years. This market is expected to grow by 10-15% CAGR (Compound Annual Growth Rate) over the next couple of years and they are the only independent company operating in the sector, with others being divisions of larger companies.
We believe the share price does not fully reflect the improving fundamentals, specifically free cash flow generation, long-term EPS growth forecast of 20% and a healthy balance sheet.
Data here is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.
Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please click PRCGX and PREOX for a list of the top ten holdings.
Perritt. Marvelous Microcaps – Big Ideas on Small Companies.
Compound annual growth rate or CAGR, is the mean annual growth rate of an investment over a specified period of time longer than one year.
EPS growth rate is the speed at which the earnings per share are growing.
Free cash flow is the cash a company generates after taking into consideration cash outflows that support its operations and maintain its capital assets.
Before you invest in the Perritt MicroCap Opportunities Fund or Perritt Ultra MicroCap Fund, please refer to the prospectus for important information about the investment company, including investment objectives, risks, charges, and expenses. You may also obtain a hard copy of the prospectus by calling 800-331-8936. The prospectus should be read carefully before you invest.
Mutual fund investing involves risk. Principal loss is possible. The Funds invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility. The Funds invest in microcap companies which tend to perform poorly during times of economic stress. The Ultra MicroCap Fund may invest in early-stage companies which tend to be more volatile and more speculative than investments in more established companies.
Past Performance does not guarantee future results.
The Perritt Funds are distributed by Quasar Distributors, LLC.
First published July 2022.