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LinkedIn Corp (LNKD), International Business Machines Corp. (IBM): Global Shortage of Talent Equals Opportunity

Currently the company is experiencing difficulties with earnings as the company reported a 1% year-over-year decline in net income in its most recent quarter. The decline in net income was driven by a 16% year-over-year decline in revenue from its systems and technology segment. Over time, I believe that the hardware business will continue to decline because of cloud virtualization. Even with cloud virtualization cannibalizing the company’s earnings, the company will be able to offset this with services and software revenue going forward.

This is just a no-brainer

LinkedIn Corp (NYSE:LNKD) has a bright future ahead of it. Finding talented employees to fill the workforce will become increasingly important. With 10,000 people reaching retirement age every day, companies will have to figure out a way to replace these employees.

Currently, LinkedIn Corp (NYSE:LNKD)’s fastest-growing segment is talent solutions. Currently talent solutions comprise 57% of the company’s revenue. The talent-solutions segment grew by 170% year-over-year. It is currently the company’s fastest-growing segment, and will continue to be going forward.

Analysts on a consensus basis anticipate the company to grow earnings by 58.4% on average over the next five years. The company is projected to grow revenue by 54.2% in the current fiscal year and 41% in the following fiscal year. The company currently trades at a 500.9 earnings multiple, but when considering the high rates of growth and the changing macro environment, the company is a compelling investment opportunity.

Middle level management is important

The biggest priority for CEOs right now is to make sure they have a right mix of talent within their organizations. Developing tomorrow’s leaders will require outside insight. The Corporate Executive Board Company (NYSE:CEB) offers business solutions like talent management and measurement. After all, talent is very important to global CEOs.

The company has 300,000 tested and proven best practices; the company produces 200 annual unique research studies, conducts 30 million annual assessments, and has 1,500 personality, cognitive, and skill tests.

It isn’t all about the products though. The company has had a successful track record in growing both net income and revenue. The company has grown revenue at a 25.6% compounded annual growth rate since 2010. It has improved its operating cash flow by 20% on average over the past three years. The company’s return on equity averaged 54% over the past three years.

Analysts on a consensus basis anticipate the company to grow earnings by 14.6% on average over the next five years. The company currently traded at a 62.4 earnings multiple. The company pays out a 1.5% dividend yield as well. The high valuation is reasonable when considering the long-term growth potential.

Conclusion

IBM will continue to grow based on projected growth rates, and macroeconomic trends. LinkedIn Corp (NYSE:LNKD) is at the forefront of employment solutions and will be in huge demand over the next 10 years. The Corporate Executive Board Company (NYSE:CEB) has some of the most practical solutions for talent development in the world, and its business will continue to grow earnings as a result of it.

Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of International Business Machines Corp. (NYSE:IBM). and LinkedIn Corp (NYSE:LNKD).

The article Global Shortage of Talent Equals Opportunity originally appeared on Fool.com.

Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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