Turnabout is fair play. Just as Monster Worldwide (NYSE: MWW) took the job recruitment industry by storm a decade ago, catching recruitment firms and newspaper advertisers off guard, LinkedIn (Nasdaq: LNKD) eventually turned Monster into an also-ran.

#-ad_banner-#​Back in 2008, LinkedIn had just $79 million in revenue while Monster had $1.3 billion. Fast-forward to 2013, and Monster’s revenues slumped to just $800 million, while LinkedIn’s sales base surpassed $1.5 billion. And look for more of the same in 2014 and 2015, by which time LinkedIn’s sales are expected to approach $3 billion.

Monster’s projected 2015 sales: stuck at around $800 million.

At least that was the consensus view before each of these firms released quarterly results late last week.  LinkedIn is starting to show growing pains, while Monster, for the second straight quarter, showed signs of a growth rebound. That may explain why shares of Monster have soared 50% since mid-October while shares of LinkedIn have tumbled nearly 20%.

Despite those divergent stock moves, shares of LinkedIn still trade for more than 11 times projected 2014 sales while Monster is valued at less than one times sales. The question for investors: Is that kind of valuation gap warranted, or a harbinger of further troubles ahead.

Pushing Harder
Despite LinkedIn’s recent share price slide, its business is not in any sort of trouble. But expenses are rising. The company is preparing to pursue a pair of growth initiatives: a more comprehensive offering to small and midsize businesses through its Marketing Solutions platform, and a more aggressive push into online jobs listings. Those expenses are likely to push 2014 earnings per share (EPS) down to around $1.70, from the prior consensus forecast of around $2.25. 

Many analysts think the increase in spending will help boost LinkedIn’s growth over the long term. “The company’s more forceful identification of new opportunities is a great step for investors to understand what the ‘next big thing’ is for LinkedIn,” note analysts at Pacific Crest Securities, who maintain their $275 price target. 

	Flickr/Nan Palmero
	Despite LinkedIn’s recent share price slide, its business is not in any sort of trouble. But expenses are rising.

But some analysts are less impressed. Merrill Lynch’s analysts noted that sales growth decelerated by a worrisome 9 percentage points in the fourth quarter, and also expressed concern that 2014 sales guidance is below consensus forecasts — despite the bigger push into those two above-noted growth areas. They rate shares as “neutral,” with a $232 target price, which represents 97 times projected 2015 profits and 36 times projected 2015 EBITDA (earnings before interest, taxes, depreciation and amortization).

Analysts at UBS rate shares as “neutral” with a $225 target price, due in large part to “decelerating corporate customer growth & revenue per corporate customer (despite price increases).” LinkedIn’s still high valuation, coupled with emerging growth concerns, are grounds enough to steer clear of this stock until shares move lower or growth re-accelerates.

Monster’s Stabilization
Shares of Monster Worldwide have rallied sharply recently as fourth-quarter revenue actually grew 1%. That may not seem like much, but is a lot better than a year ago, when the company appeared headed for a terminal decline.

Analysts at Oppenheimer see several positive trends: They think the modest sales improvement “potentially suggests MWW’s core business is stabilizing. Revenue was solid and beat our expectations in North America and International,” adding that “management cited pockets of improvement in Germany, Sweden, France and the U.K., which should bode well” heading into the current fiscal year. They also note that deferred revenue grew 8% sequentially. 

These aren’t the kind of data points that strike fear into the hearts of LinkedIn investors. At least not yet.

Analysts don’t yet envision major upside for Monster, especially after its recent strong run, but recent results are encouraging. Management attributes the success to “steps it has taken to demonstrate value-add to clients and help drive business,” note analysts at BMO Capital. These analysts think investors will have a better understanding of Monster’s growth initiatives when the company holds a day-long set of meetings with analysts in May.

If Monster can begin to show solid revenue growth, then it could produce great earnings leverage as the company’s share count is falling rapidly. As I noted back in June on our sister site ProfitableTrading.com, “This is a company that already shrank its share count by 9 million to 114 million in 2012, and at current prices, a new $200 million buyback would take that share count down by 36 million to around 80 million.”

How did that prediction play out? Shares outstanding have already fallen to 98 million by the end of 2013, and with $93 million remaining on the current buyback authorization, the share count would likely fall into the low 80s if share prices remain at current levels. That means shares outstanding will have fallen by nearly 25% over a two-year period.

Risks to Consider: Monster’s results have merely stabilized, but this stock’s recent momentum will stall out if management doesn’t begin to deliver revenue growth in coming quarters. 

Action To Take –> It’s too soon to think that LinkedIn is in any sort of trouble, and it’s also premature to assume that Monster is ready to take back market share. But the stunningly large valuation gap that remains between these two companies means much greater potential upside exists with the underdog (Monster) and not the top dog (LinkedIn).

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