ManpowerGroup (MAN)

Workforce solutions provider ManpowerGroup (NYSE:MAN) reported Q1 CY2025 results topping the market’s revenue expectations, but sales fell by 7.1% year on year to $4.09 billion. Its GAAP profit of $0.12 per share was 76.4% below analysts’ consensus estimates.

Company Overview

Founded during the post-World War II economic boom when businesses needed temporary workers, ManpowerGroup (NYSE:MAN) connects millions of people to employment opportunities through its global network of staffing, recruitment, and workforce management services.

The Professional Staffing & HR Solutions subsector within Business Services is set to benefit from evolving workforce trends, including the rise of remote work and the gig economy. With companies casting a wider net to find talent due to remote work, the expertise of staffing and recruiting companies is even more valuable. For those who invest wisely, the use of predictive AI in recruitment and screening as well as automation in HR workflows can enhance efficiency and scalability. On the other hand, digitization means that talent discovery is less of a manual process, opening the door for tech-first platforms. Additionally, regulatory scrutiny around data privacy in HR is evolving and may require companies in this sector to change their go-to-market strategies over time.

ManpowerGroup competes with global staffing and workforce solutions providers like Adecco Group, Randstad, and Robert Half (NYSE:RHI), as well as specialized firms such as Kelly Services (NASDAQ:KELYA), Korn Ferry (NYSE:KFY), and Recruit Holdings (owner of Indeed and Glassdoor).

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $17.54 billion in revenue over the past 12 months, ManpowerGroup is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. For ManpowerGroup to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, ManpowerGroup struggled to generate demand over the last five years. Its sales dropped by 3% annually, a rough starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. ManpowerGroup’s recent performance shows its demand remained suppressed as its revenue has declined by 5% annually over the last two years.

ManpowerGroup also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, ManpowerGroup’s organic revenue averaged 3.4% year-on-year declines. Because this number is better than its normal revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline results.

This quarter, ManpowerGroup’s revenue fell by 7.1% year on year to $4.09 billion but beat Wall Street’s estimates by 2.9%.

Looking ahead, sell-side analysts expect revenue to decline by 3% over the next 12 months. While this projection is better than its two-year trend, it's tough to feel optimistic about a company facing demand difficulties.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

ManpowerGroup was profitable over the last five years but held back by its large cost base. Its average operating margin of 2% was weak for a business services business.

Analyzing the trend in its profitability, ManpowerGroup’s operating margin might fluctuated slightly but has generally stayed the same over the last five years, meaning it will take a fundamental shift in the business model to change.

In Q1, ManpowerGroup’s breakeven margin was in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for ManpowerGroup, its EPS declined by 19.7% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

In Q1, ManpowerGroup reported EPS at $0.12, down from $0.81 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects ManpowerGroup’s full-year EPS of $2.31 to grow 75.9%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

ManpowerGroup has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.1%, lousy for a business services business.

Taking a step back, we can see that ManpowerGroup’s margin dropped by 4.7 percentage points during that time. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business.

ManpowerGroup burned through $166.9 million of cash in Q1, equivalent to a negative 4.1% margin. The company’s cash flow turned negative after being positive in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

ManpowerGroup historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.4%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, ManpowerGroup’s ROIC has unfortunately decreased. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

ManpowerGroup reported $395 million of cash and $1.17 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $417.9 million of EBITDA over the last 12 months, we view ManpowerGroup’s 1.9× net-debt-to-EBITDA ratio as safe. We also see its $32.9 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We liked that ManpowerGroup beat analysts’ organic revenue expectations this quarter, leading to a revenue beat. On the other hand, both its EBITDA and EPS missed. Looking ahead, EPS guidance for next quarter missed significantly. Overall, this was a weaker quarter. The stock traded down 8.2% to $45.41 immediately after reporting.

Updated: May 22, 2025 at 11:59 PM EDT

When considering an investment in ManpowerGroup, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

ManpowerGroup doesn’t pass our quality test. For starters, its revenue has declined over the last five years, and analysts don’t see anything changing over the next 12 months. And while its scale makes it a trusted partner with negotiating leverage, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its organic revenue declined.

ManpowerGroup’s P/E ratio based on the next 12 months is 10.3x. This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $49.90 on the company (compared to the current share price of $43.03).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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