RBC Capital upgrades PageGroup, says it's 'best staffing play'

It noted the stock has been out of favour, but said it has the best geographic spread and has seen strong growth acceleration. In addition, it argued that headcount investment should pay off and that PageGroup should be the biggest beneficiary of any further improvement in the permanent market.

To take into account better fourth-quarter trading and a positive outlook, RBC lifted its mid-cycle discounted cash flow valuation to 640p.

"Page is a different beast from the glory days of 2006-7. Back then, it was more geared to financial services and accounting, was much more exposed to the UK and benefited from all economies firing at the same time, strong wage inflation, and strong pricing.

"Since then, it has diversified geographically and by specialism and has developed the Page Personnel business. Hence, we are unlikely to see the peak margins of old, but on the positive side, the business should be far more robust through the cycle."

RBC reckons Page can pay special dividends of £40m, £75m and £80m in 2018/19/20, respectively.

Also on Monday, the bank lifted its price target on fellow recruiter Hays to 210p from 180p, keeping the rating at 'sector perform'.

"Hays continues to deliver operationally and the outlook remains good, albeit comparatives do get tougher from here. Hays remains a quality cyclical with high total dividend potential (average three-year total yield circa 5%). However, we see the valuation as up with events."

At 1050 GMT, PageGroup shares were up 3.3% to 549.50p and Hays was up 0.4% to 201.80p.