$Heidrick & Struggles (HSII.US)$It is an American company th...

Over the past five years, the gross profit margin has gradually fallen from 32.2% to 23.6%, while the return on equity has lost money for two years and 16% to 24% for the remaining three years. Both figures are not very good-looking.

Revenue in the first four years of the five years was basically between 6.3and 7.3. it soared by 60 per cent in 2021, with a similar operating profit, 105 per cent in 2021, a loss of 2017 and 2020 in net profit, and not much in 2021, only 55 per cent more than in 2019.

Growth continued in the first two quarters of 2022, with revenue, operating profit and net profit growing by 29%, 16% and 20%, respectively.

The income statement shows that overall operating profit continued to grow despite a severe decline in gross profit margin and a continued decline in expenses to offset the adverse impact of rising costs. The proportion of interest expenses is so low that it can be ignored.

There were large other expenses in 2017 and 2020, mainly focused on restructuring and asset impairment, so net profit turned to a loss in these two years. For stocks with frequent non-recurrent gains and losses, the average net profit in the past five years is 45.24 million, and the corresponding price-to-earnings ratio is 11.3.

The asset-liability ratio has risen from 63.8% to 69.6% in the past five years and has fallen to 62.5% in the last two quarters.

The balance sheet shows that accounts receivable are growing rapidly and are still within a reasonable range. Accounts receivable increased by 90 million in the first two quarters of 2022, exceeding the current net profit and may be seasonal.

There is no inventory, no interest-bearing liabilities, although the debt ratio is high, but mostly operating liabilities, mainly benign liabilities.

Over the past five years, the net operating amount of cash flow has been significantly higher than the net investment, and the shareholders have a lot of surplus. The net financing continued to be a net outflow, mainly for the payment of dividends.

The current price-to-earnings ratio is 7.3.The price-to-earnings ratio is TTM 6.6. the price-to-earnings ratio is 11.3 based on the five-year average net profit. Considering that restructuring, mergers and acquisitions and substantial asset write-downs occur every few years, the current price discount is not enough.