In the aftermath of Brexit, some stocks fared better than others, for example, those with international exposure were in high demand as investors sought to profit from the decline in the value of the pound. Meanwhile, UK-focused companies, specifically those in retail and recruitment, have struggled ever since the June 2016 vote.
Investors' lack of desire for these companies has thrown up some fantastic bargains as, despite the dour market sentiment, business has continued as usual.
Between June 2015 and June 2016, shares in Pagegroup (LSE: PAGE) lost nearly half of their value excluding dividends, but over the past year, the shares have surged higher rising 57% over the previous 12 months.
A trading update from the company today showed why investor confidence has returned. The firm reported record group gross profit with growth of 7.7% during the first half of 2017. Revenue growth was reported across the majority of the company's divisions. It was particularly strong in Europe and the Americas. With revenues at record levels, the group headcount has also hit record numbers with 178 new fee earners, or recruiters added in the second quarter. At the end of the quarter, the company had a net cash balance of £87m.
According to today's update, Pagegroup is powering ahead, but the group's valuation remains depressed. At the time of writing shares in the recruitment group trade at a forward P/E of 18.6, which is significantly below its five-year average of 24.6. The shares support a dividend yield of 3.6%, and the payout is covered 1.5 times by earnings per share.
Return to form
Like Pagegroup, Hays (LSE: HAS) saw its share price crumble by around 50% in 2016, but the shares have since rallied to 61% as investors have bought back into the group's growth story.
For the fiscal year ended 30 June, City analysts are expecting Hays to report earnings per share growth of 12% year-on-year followed by earnings growth of 9% for the following fiscal year. It seems as if the company is well on the way to meeting these forecasts with management announcing at the beginning of April that profits for the financial year were likely to be at the top end of market forecasts after the firm produced a record level of quarterly net fees.
Based on these estimates, shares in the recruitment group are trading at a forward P/E of 17.5, falling to 16.1 for fiscal 2018. Once again, these multiples are below the company's own five-year average valuation, which currently stands at 19.
The bottom line
So overall, even though these recruiters suffered in relation to Brexit, it now looks as if Pagegroup and Hays are back on track. What's more, even after recent gains, shares in these companies look undervalued compared to historic valuations implying that there could still be further upside ahead.
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Rupert Hargreaves has no position in any shares 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.