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3 Stocks From the Promising Staffing Space to Watch Out For
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There has been a solid transition from a candidate-driven market to a job-oriented market of late. Staffing companies are finding new opportunities with the digitization of the workforce. The remote working model is leading to cost savings for industry players by bringing down their spending on real estate and reduction of business travel. These factors bode well for companies in the Zacks Staffing industry. Additionally, continued government response in the form of pandemic-relief packages and expanded unemployment benefits have been acting as other tailwinds.
With the gradual resumption of business activities, the global staffing industry is anticipated to increase by 12% to $445 billion in 2021, per a report by Staffing Industry Analysts. This marks a steady improvement from a downfall of 11% in 2020.
Robert Half International Inc.(RHI - Free Report) , Insperity, Inc. (NSP - Free Report) and Kforce, Inc. (KFRC - Free Report) are some stocks that are likely to gain from the abovementioned industry trends. However, job loss concerns amid market uncertainties persist.
Industry Description
The Zacks Staffing industry comprises companies, which provides a wide range of services related to human resources and workforce solutions and services. These include employment screening, recruitment (both for temporary staffing and long-term placements), retirement solutions, human capital management, payroll management, performance management, organizational planning, financial and expense management. Some industry participants also provide staffing and risk consulting services, professional staffing services and solutions in the United States and internationally, and business solutions to improve the performance of small and medium-sized businesses along with organizational consulting services worldwide.
What's Shaping the Future of Staffing Industry?
Healthy Demand Environment:The industry has been witnessing growth in revenues and income over the past few years, which has enabled most players to pay out stable dividends and repurchase shares. The industry also stands to benefit from the gradual resumption of business activities, which were postponed or restricted due to the coronavirus-induced strict lockdowns across the globe. This has led to additional hiring and wage increase.
Shift in Recruitment Patterns: A solid transition has been noticed from a candidate-driven market (where applicants would apply for or choose the roles based on their educational background and skills) to a job-oriented market (where applicants are required to adapt themselves with the available open positions).
Coronavirus-induced lockdowns have resulted in unproductive units in several industries, prompting companies (especially in the aviation, travel & tourism, hospitality, manufacturing, automotive, media and entertainment sectors) to reduce their temporary staff. However, there has been a spike in hiring for essential services like e-commerce, logistics (package/freight delivery, hyper-local delivery), healthcare and information technology.
Additionally, a number of temporary employees are being hired across retail, co-operative and agricultural operations, including the distribution of food, milk, groceries, vegetables, under different job roles, ranging from delivery agents, supervisors, drivers, customer care. Other essential services involve workers engaged in manufacturing and distribution of PPEs, and employees in banks, ATMs, telecom and Internet services.
Increased Adoption of Technologies: The industry has witnessed a shift in its operating model with an increase in the number of remote workers. The remote working model is leading to cost savings for many firms by bringing down their spending on real estate and reduction of business travel. Staffing companies are also finding new opportunities with the digitization of the workforce and demand for software-as-a-service solutions to meet new challenges in the current scenario.
Technology-based recruiting techniques like social media, mobile technology, artificial intelligence and Big Data are in demand. Video conferencing tools such as Google Meet, Zoom, Skype and Microsoft Teams are being used to communicate with clients, conduct interviews and meetings, manage staff virtually, remote training and remote surveillance. Also, technologies like cloud and blockchain offer more storage and safety to HR data. These trends should keep demand for staffing services in good shape.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Staffing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #25. This rank places it in the top 10% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The buy-side analysts covering the companies in this industry have been increasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has increased 55.7%.
Before we present a few stocks that investors can buy or retain given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector and S&P 500
The Zacks Staffing industry has outperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has gained 54.1% over this period against a 16.4% decline of the broader sector. The Zacks S&P 500 composite has risen 32.3% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 9.34X compared with the S&P 500’s 15.81X and the sector’s 16.95X.
Over the past five years, the industry has traded as high as 13.17X, as low as 3.38X and at the median of 7.81X, as the charts below show.
EV-to-EBITDA
3 Staffing Stocks to Keep a Close Eye On
Kforce: This Zacks Rank #1 (Strong Buy) Florida-based company provides professional staffing services and solutions in the United States and internationally. You can see the complete list of today’s Zacks #1 Rank stocks here. Kforce’s technology staffing and solutions business has helped it stay competitive amid these challenging times. The rising demand for technology solutions has enabled Kforce to increase investments in the cloud-based, technology-enabled operating model. This is likely to supplement the company’s growth amid coronavirus-induced dependency on technology. Apart from this, it is expected to benefit from modifications in its business model and reduction of operating costs.
The Zacks Consensus Estimate for Kforce’s 2021 EPS has improved 10.2% in the past 90 days. KFRC stock has gained 90.8% in the past year.
Price & Consensus: KFRC
Robert Half: This Zacks Rank #2 (Buy) California-based company provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. Robert Half is witnessing demand for its staffing and business consulting services, amid the economic crisis resulting from the COVID-19 pandemic. It’s wholly owned subsidiary, Protiviti continues to benefit from solid solutions offerings and pipeline. Robert Half has been utilizing a major share of its capital expenditures on investments in software initiatives and technology infrastructure. This should aid the company’s growth prospects amid coronavirus-induced dependency on technology. Robert Half’s solid balance sheet is a major positive. Consistency in rewarding shareholders through share repurchases boost investor confidence and positively impact earnings per share.
The Zacks Consensus Estimate for RHI’s 2021 EPS has improved 5.4% in the past 90 days. Robert Half stock has gained 86.8% in the past year.
Price & Consensus: RHI
Insperity: This Zacks Rank #3 (Hold) Texas-based company provides human resources and business solutions to improve business performance for small and medium-sized businesses.
An increase in the average number of worksite employees paid per month has been aiding Insperity’s top line. Strength across sales, client retention and growth in the client base have also acted as other tailwinds. Further, Insperity updated its guidance for 2021.The company now projects adjusted earnings in the band of $4.25-$4.46 per share compared with the prior guidance of $4.00-$4.59. Adjusted EBITDA is now anticipated in the range of $271-$282 million compared with the prior guidance of $258-$288 million. Insperityexpects average WSEEs in the range of 250,100-250,600 compared with the prior guidance of 247,100-249,500.
The Zacks Consensus Estimate for NSP’s 2021 EPS has improved 0.7% in the past 90 days. Insperity stock has gained 33.7% in the past year.
Price & Consensus: NSP
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3 Stocks From the Promising Staffing Space to Watch Out For
There has been a solid transition from a candidate-driven market to a job-oriented market of late. Staffing companies are finding new opportunities with the digitization of the workforce. The remote working model is leading to cost savings for industry players by bringing down their spending on real estate and reduction of business travel. These factors bode well for companies in the Zacks Staffing industry. Additionally, continued government response in the form of pandemic-relief packages and expanded unemployment benefits have been acting as other tailwinds.
With the gradual resumption of business activities, the global staffing industry is anticipated to increase by 12% to $445 billion in 2021, per a report by Staffing Industry Analysts. This marks a steady improvement from a downfall of 11% in 2020.
Robert Half International Inc.(RHI - Free Report) , Insperity, Inc. (NSP - Free Report) and Kforce, Inc. (KFRC - Free Report) are some stocks that are likely to gain from the abovementioned industry trends. However, job loss concerns amid market uncertainties persist.
Industry Description
The Zacks Staffing industry comprises companies, which provides a wide range of services related to human resources and workforce solutions and services. These include employment screening, recruitment (both for temporary staffing and long-term placements), retirement solutions, human capital management, payroll management, performance management, organizational planning, financial and expense management. Some industry participants also provide staffing and risk consulting services, professional staffing services and solutions in the United States and internationally, and business solutions to improve the performance of small and medium-sized businesses along with organizational consulting services worldwide.
What's Shaping the Future of Staffing Industry?
Healthy Demand Environment:The industry has been witnessing growth in revenues and income over the past few years, which has enabled most players to pay out stable dividends and repurchase shares. The industry also stands to benefit from the gradual resumption of business activities, which were postponed or restricted due to the coronavirus-induced strict lockdowns across the globe. This has led to additional hiring and wage increase.
Shift in Recruitment Patterns: A solid transition has been noticed from a candidate-driven market (where applicants would apply for or choose the roles based on their educational background and skills) to a job-oriented market (where applicants are required to adapt themselves with the available open positions).
Coronavirus-induced lockdowns have resulted in unproductive units in several industries, prompting companies (especially in the aviation, travel & tourism, hospitality, manufacturing, automotive, media and entertainment sectors) to reduce their temporary staff. However, there has been a spike in hiring for essential services like e-commerce, logistics (package/freight delivery, hyper-local delivery), healthcare and information technology.
Additionally, a number of temporary employees are being hired across retail, co-operative and agricultural operations, including the distribution of food, milk, groceries, vegetables, under different job roles, ranging from delivery agents, supervisors, drivers, customer care. Other essential services involve workers engaged in manufacturing and distribution of PPEs, and employees in banks, ATMs, telecom and Internet services.
Increased Adoption of Technologies: The industry has witnessed a shift in its operating model with an increase in the number of remote workers. The remote working model is leading to cost savings for many firms by bringing down their spending on real estate and reduction of business travel. Staffing companies are also finding new opportunities with the digitization of the workforce and demand for software-as-a-service solutions to meet new challenges in the current scenario.
Technology-based recruiting techniques like social media, mobile technology, artificial intelligence and Big Data are in demand. Video conferencing tools such as Google Meet, Zoom, Skype and Microsoft Teams are being used to communicate with clients, conduct interviews and meetings, manage staff virtually, remote training and remote surveillance. Also, technologies like cloud and blockchain offer more storage and safety to HR data. These trends should keep demand for staffing services in good shape.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Staffing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #25. This rank places it in the top 10% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The buy-side analysts covering the companies in this industry have been increasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has increased 55.7%.
Before we present a few stocks that investors can buy or retain given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Outperforms Sector and S&P 500
The Zacks Staffing industry has outperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has gained 54.1% over this period against a 16.4% decline of the broader sector. The Zacks S&P 500 composite has risen 32.3% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing staffing stocks because of their high debt levels, the industry is currently trading at 9.34X compared with the S&P 500’s 15.81X and the sector’s 16.95X.
Over the past five years, the industry has traded as high as 13.17X, as low as 3.38X and at the median of 7.81X, as the charts below show.
EV-to-EBITDA
3 Staffing Stocks to Keep a Close Eye On
Kforce: This Zacks Rank #1 (Strong Buy) Florida-based company provides professional staffing services and solutions in the United States and internationally. You can see the complete list of today’s Zacks #1 Rank stocks here. Kforce’s technology staffing and solutions business has helped it stay competitive amid these challenging times. The rising demand for technology solutions has enabled Kforce to increase investments in the cloud-based, technology-enabled operating model. This is likely to supplement the company’s growth amid coronavirus-induced dependency on technology. Apart from this, it is expected to benefit from modifications in its business model and reduction of operating costs.
The Zacks Consensus Estimate for Kforce’s 2021 EPS has improved 10.2% in the past 90 days. KFRC stock has gained 90.8% in the past year.
Price & Consensus: KFRC
Robert Half: This Zacks Rank #2 (Buy) California-based company provides staffing and risk consulting services in North America, South America, Europe, Asia, and Australia. Robert Half is witnessing demand for its staffing and business consulting services, amid the economic crisis resulting from the COVID-19 pandemic. It’s wholly owned subsidiary, Protiviti continues to benefit from solid solutions offerings and pipeline. Robert Half has been utilizing a major share of its capital expenditures on investments in software initiatives and technology infrastructure. This should aid the company’s growth prospects amid coronavirus-induced dependency on technology. Robert Half’s solid balance sheet is a major positive. Consistency in rewarding shareholders through share repurchases boost investor confidence and positively impact earnings per share.
The Zacks Consensus Estimate for RHI’s 2021 EPS has improved 5.4% in the past 90 days. Robert Half stock has gained 86.8% in the past year.
Price & Consensus: RHI
Insperity: This Zacks Rank #3 (Hold) Texas-based company provides human resources and business solutions to improve business performance for small and medium-sized businesses.
An increase in the average number of worksite employees paid per month has been aiding Insperity’s top line. Strength across sales, client retention and growth in the client base have also acted as other tailwinds. Further, Insperity updated its guidance for 2021.The company now projects adjusted earnings in the band of $4.25-$4.46 per share compared with the prior guidance of $4.00-$4.59. Adjusted EBITDA is now anticipated in the range of $271-$282 million compared with the prior guidance of $258-$288 million. Insperityexpects average WSEEs in the range of 250,100-250,600 compared with the prior guidance of 247,100-249,500.
The Zacks Consensus Estimate for NSP’s 2021 EPS has improved 0.7% in the past 90 days. Insperity stock has gained 33.7% in the past year.
Price & Consensus: NSP