Over the past 12 months, shares in global professional recruitment consultancy Robert Walters(LSE: RWA) have powered ahead of the market.
Since the beginning of January last year, the shares have gained 81% excluding dividends, smashing the FTSE 100 by 75% over the same period. At the beginning of the year, shares in the group supported a dividend yield of 2.8% so if you add in this growth, the stock has outperformed by around 78%.
But can this continue? Well, if the firm's fourth-quarter trading update is anything to go by, it can.
According to Robert Walters' fourth-quarter update, which was published today, net fee income for the fourth quarter of 2017 rose 19% year-on-year to £90.5m from £76.1m, a rise of 22% at constant currency rates thanks to the global economic recovery. The best performing region was Europe, as the area finally starts to pull itself out of its financial slump. For the period Europe posted a rise in net fee income of 31%, or 28% at constant rates, to £22.6m. The UK, despite Brexit woes, posted 13% growth to £26.2m.
Commenting on the figures, CEO Robert Walters said: "The group delivered another quarter of record results with net fee income growing 22% year-on-year. Growth was once again broad-based across permanent, contract, interim and recruitment process outsourcing across the group's geographic regions."
The strong end of the year means that the group is now well on track to hit City forecasts for growth for the year. Analysts are expecting the company to report an earnings rise of 30% for the third consecutive year. Over the past five years, the firm seems to have avoided all economic pitfalls and has grown earnings over 330%.
With this being the case, I'm confident that as economic growth around the world picks up speed, Robert Walters can continue to notch up double-digit earnings rises every year. With this being the case, I believe that the firm's current valuation of 17 times forward earnings may undervalue the business.
No problems here
SThree(LSE: STHR) is another recruitment business that's gone from strength to strength over the past few years.
The company, which is focused on specialist recruitment services in the science, technology, engineering and mathematics industries has grown earnings 150% during the past five years.
Only a few months ago the firm announced that it was set to outperform this year, following a strong performance in Continental Europe and in the US. The consensus had been predicting adjusted pre-tax profit is £43.8m for the year ended 30 November, but the group now expects to beat this, implying earnings growth of 14% or more for the full year.
And like Robert Walters, SThree should be able to continue to rise at a double-digit rate as economic expansion picks up around the world. The shares currently trade at a forward P/E of 15.2 and yield 3.8%, so this stock offers a combination of both income and growth.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.