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Staffing Industry Near-Term Outlook Not Quite Impressive
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The Zacks Staffing industry comprises companies that offer a wide range of services related to human resources and workforce solutions. 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.
Per a report by statista, U.S. staffing industry has shown steady improvement over the past few years. From $119.4 billion revenues in 2013, the industry’s top line grew to $148.1 billion in 2018. For 2019 and 2020, revenues are anticipated to be around $153.5 billion and $157.8 billion, respectively. Per talentnow, global staffing revenues are expected to register 6% growth in 2019 compared with 7% growth in 2018.
Here are the industry’s three major themes:
The staffing industry has been growing roughly two times faster than the economy, on average since the end of the Great Recession.A strong U.S. economy and Trump’s business-friendly moves have been benefiting manufacturing as well as non-manufacturing sectors, which, in turn, are aiding the staffing industry with additional hiring and wage increase.
Staffing firms are shifting toward employee-friendly, technology-based recruiting techniques like social media, mobile technology, artificial intelligence and big data. 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.
Owing to record low unemployment and a tight labor market, employers are reluctant to lay off skilled employees. This has reduced the pool of experienced candidates. As a result, hiring of temporary and contractual workers is likely to increase throughout the year.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Staffing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #222. This rank places it in the bottom 13% 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 solid 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 sell-side analysts covering the companies in this industry have been decreasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has decreased 13.9%.
Despite the bleak prospects, we present a few stocks that you may want to consider for your portfolio. But before that, it’s worth taking a look at the industry’s performance and current valuation.
Industry Underperforms Sector and S&P 500
The Zacks Staffing industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 5.8% over this period against 12.6% rally of the broader sector and 4.3% rise of the Zacks S&P 500 composite.
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 7.52X compared with the S&P 500’s 10.86X and the sector’s 11.58X.
Over the past five years, the industry has traded as high as 9.90X, as low as 5.66X and at the median of 7.81X, as the charts below show.
EV-to-EBITDA
Bottom Line
A strong economy, which drives manufacturing and non-manufacturing activities, is aiding the staffing industry. However, higher talent cost due to a competitive labor market and lack of skilled labor are concerns.
Two stocks in the Zacks Staffing universe currently hold a Zacks Rank #2 (Buy). Below we have also mentioned two stocks from the same industry, which we believe investors should retain in their portfolio as they carry a Zacks Rank #3 (Hold). All the four stocks have witnessed upward earnings estimate revisions in the past 60 days.
Insperity, Inc. (NSP - Free Report) : The stock of this Texas-based provider of human resources (HR) and business solutions has gained 23.7% year to date. The Zacks Consensus Estimate for current year EPS has increased 2.2% in the past 60 days. Currently, it carries a Zacks Rank #2.
Price and Consensus: NSP
Kelly Services, Inc. (KELYA - Free Report) :The stock of this Michigan-based provider of workforce solutions has gained 19.3% year to date. The Zacks Consensus Estimate for current year EPS has improved 4.3% in the past 60 days. Currently, it carries a Zacks Rank #2.
Price and Consensus: KELYA
ManpowerGroup Inc. (MAN - Free Report) : The stock of this Wisconsin-based provider of workforce solutions and services has climbed 41.1% year to date. The Zacks Consensus Estimate for current year EPS has improved 1.9% in the past 60 days. Currently, it has a Zacks Rank #3.
Price and Consensus: MAN
Heidrick & Struggles International, Inc. (HSII - Free Report) : The stock of this Illinois-based provider of executive search, culture shaping, and leadership consulting services has gained 5.6% year to date. The Zacks Consensus Estimate for current year EPS has increased 0.8% in the past 60 days. Currently, it carries a Zacks Rank #3.
Price and Consensus: HSII
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Staffing Industry Near-Term Outlook Not Quite Impressive
The Zacks Staffing industry comprises companies that offer a wide range of services related to human resources and workforce solutions. 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.
Per a report by statista, U.S. staffing industry has shown steady improvement over the past few years. From $119.4 billion revenues in 2013, the industry’s top line grew to $148.1 billion in 2018. For 2019 and 2020, revenues are anticipated to be around $153.5 billion and $157.8 billion, respectively. Per talentnow, global staffing revenues are expected to register 6% growth in 2019 compared with 7% growth in 2018.
Here are the industry’s three major themes:
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Staffing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #222. This rank places it in the bottom 13% 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 solid 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 sell-side analysts covering the companies in this industry have been decreasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has decreased 13.9%.
Despite the bleak prospects, we present a few stocks that you may want to consider for your portfolio. But before that, it’s worth taking a look at the industry’s performance and current valuation.
Industry Underperforms Sector and S&P 500
The Zacks Staffing industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 5.8% over this period against 12.6% rally of the broader sector and 4.3% rise of the Zacks S&P 500 composite.
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 7.52X compared with the S&P 500’s 10.86X and the sector’s 11.58X.
Over the past five years, the industry has traded as high as 9.90X, as low as 5.66X and at the median of 7.81X, as the charts below show.
EV-to-EBITDA
Bottom Line
A strong economy, which drives manufacturing and non-manufacturing activities, is aiding the staffing industry. However, higher talent cost due to a competitive labor market and lack of skilled labor are concerns.
Two stocks in the Zacks Staffing universe currently hold a Zacks Rank #2 (Buy). Below we have also mentioned two stocks from the same industry, which we believe investors should retain in their portfolio as they carry a Zacks Rank #3 (Hold). All the four stocks have witnessed upward earnings estimate revisions in the past 60 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s take a look at the stocks.
Insperity, Inc. (NSP - Free Report) : The stock of this Texas-based provider of human resources (HR) and business solutions has gained 23.7% year to date. The Zacks Consensus Estimate for current year EPS has increased 2.2% in the past 60 days. Currently, it carries a Zacks Rank #2.
Price and Consensus: NSP
Kelly Services, Inc. (KELYA - Free Report) :The stock of this Michigan-based provider of workforce solutions has gained 19.3% year to date. The Zacks Consensus Estimate for current year EPS has improved 4.3% in the past 60 days. Currently, it carries a Zacks Rank #2.
Price and Consensus: KELYA
ManpowerGroup Inc. (MAN - Free Report) : The stock of this Wisconsin-based provider of workforce solutions and services has climbed 41.1% year to date. The Zacks Consensus Estimate for current year EPS has improved 1.9% in the past 60 days. Currently, it has a Zacks Rank #3.
Price and Consensus: MAN
Heidrick & Struggles International, Inc. (HSII - Free Report) : The stock of this Illinois-based provider of executive search, culture shaping, and leadership consulting services has gained 5.6% year to date. The Zacks Consensus Estimate for current year EPS has increased 0.8% in the past 60 days. Currently, it carries a Zacks Rank #3.
Price and Consensus: HSII
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>