Nows the perfect time to invest in this fast-growing Russian HR platform.

Since 2000, HeadHunter Group (NASDAQ:HHR) has been at the forefront of bringing non-state-assigned jobs into countries of the former Soviet Union. The digital recruitment platform has hosted over 1 billion job applications from inception, and its revenue is soaring.

During the second quarter of 2021, the companys sales grew by a stunning 155% year over year to 3.911 billion rubles ($52.7 million). In the past 12 months, HeadHunters stock price is up a staggering 156%, far outpacing the S&P 500s 30.75% gain during the same period.

In addition, one need not worry too much about competition from Microsofts LinkedIn, as the latter is currently banned in Russia due to not abiding by the countrys data privacy regulations. So lets look at why nows the time to invest in what SimilarWeb says is the worlds third-largest jobs and employment search engine.

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Image source: Getty Images.

Whats so special about HeadHunter?

At the time of writing, there were 6.55 million job seekers, 124,482 employers, and 185,071 vacancies listed on the HeadHunter website. In addition, the company has partnerships with 1,321 talent-poaching agencies. On Alphabets Google Play app store, the HeadHunter app is rated 4.8 out of five stars with 743,967 reviews. The app has over 10 million installs.

The website is not that different from the likes of the job search engine Indeed (the worlds largest). Its business model has changed very little over the years. Enterprises pay for the right to access HeadHunters enormous database, as well as the ability to list vacancies. 

But its use is not limited to matching job seekers with potential employers. Data analytics firms also benefit from accessing HeadHunters database. The total number of paying customers on the site surpassed 300,000 in the first half of the year. This was also partly driven by acquiring competing hiring site Zarplata.ru (literally: salary), which has a substantial market share in Siberia and the Ural Mountains. The deal, completed at the end of 2020, added more than 125,000 enterprise clients to its platform.  

HeadHunters presence is not only limited to Russia. Like many other Russia-based tech firms, the company extends across the former Soviet Union, most notably in Ukraine. Its grc.ua subsidiary currently hosts 91,493 companies with 21,027 vacancies. Only about 8.1% of its sales are coming from outside Russia at the moment, so theres definitely a lot of potential for it to grow. 

Whats more, HeadHunter is highly profitable. Its net quarterly income of 1.28 billion rubles increased a stunning 435% compared to 2020s Q2. Granted, the 2020 quarter was for the three months ending June 30, and it partially reflects the low level of jobs being posted at the initial height of the pandemic during that time. But the 2021 figure also doesnt account for HeadHunters new acquisitions, so not all the growth is pandemic related. The company has a net income margin of 33%.

Whats the outlook?

Some of this growth also comes from the increasing digitization of the Russian economy due to the pandemic. But do not expect the rate of growth to be sustainable.

Recent lockdowns due to the rampant spread of the delta variant in the Moscow Oblast (the metro region surrounding the actual capital) caused a huge round of layoffs in its hospitality sector. Unfortunately, it has been widely reported that most Russians do not trust taking their own state-developed Sputnik V vaccine, and vaccine hesitancy as a whole is pretty standard in the country. Because of this hesitancy, investors should be aware that more lockdowns are likely to disrupt hiring activity in the regions HeadHunters serves in the quarters to come.

Despite this potential headwind, the past year has shown that tech companies with substantial market shares have managed to weather the pandemic just fine. Sales growth might go down with lockdowns but they tend to soar once the lockdowns end. In addition, HeadHunter stock is only trading for 59 times earnings, which is far cheaper than the Information Technology sector average of 102 times earnings. So if you have a sense of adventure (into distant, frigid lands) and a big risk appetite (for Russian HR platforms), this is a solid tech stock for you. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fools board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fools board of directors. Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Microsoft. The Motley Fool has a disclosure policy.

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