We arrive at our CHF28.6 target price using four valuation tools: PE, EV/EBITA sector multiple, DCF/EVA, and ROCE. We apply a 10-15% EV/EBITA sector discount to reflect Adecco's earnings cyclicality. We corroborate our target price through a combination of PE, ROCE, and DCF/EVA valuations. We assume 3% perpetuity growth and WACC of 8%.

We see the following risks to our investment view and target price: 

Staffing growth is highly correlated to economic activity – earnings are highly sensitive to the economic cycle.  

Due to the relatively high fixed costs associated with its branch network, earnings are strongly operationally geared. 

Demand for staffing services can be affected by labour market legislation.  

Adecco's key markets are France and the US. A sudden change in demand in either of these markets could have a substantial impact on group earnings.  

Adecco is looking to bolster its professional staffing operations, which implies acquisition risks.  

We see few synergies between generalist and specialist staffing operations, and cross-selling could potentially trigger margin dilution.  

If the impact on the company from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets.  Conversely, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our target.