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Staffing Industry Outlook: Favorable Policies to Aid Growth

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The Zacks Staffing industry comprises companies that offer a wide range of services related to human resources and workforce solutions. The services include employment screening, recruiting (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 statista report, U.S. staffing industry has grown steadily over the past few years. The industry’s revenues grew from $119.4 billion in 2013 to $142.8 billion in 2017.

Per a forecast by Staffing Industry Analysts (SIA), global staffing revenues will grow 6% in 2019. The temporary staffing market in the United States is expected to grow 3% in 2019.

Here are the industry’s three major themes:

  • The industry has been growing steadily on promising developments in the broader economy. Trump administration’s business-friendly approach, including tax cuts and higher government spending, has been a major catalyst. Thriving manufacturing and non-manufacturing activities on the back of favorable policies are leading to 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 that are in demand.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Staffing industry is housed within the broader Zacks Business Services sector. It currently carries a Zacks Industry Rank #109, which places it in the top 43% 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 steadily increasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has increased 2.6%.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market 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 16.5% over this period compared with 1.6% decline of the broader sector and 7.1% decline 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) ratio, which is commonly used for valuing staffing stocks, the industry is currently trading at 7.02X compared with the S&P 500’s 9.82X and the sector’s 10.30X.

EV-to-EBITDA

 

 

Over the past five years, the industry has traded as high as 9.91X, as low as 5.66X and at the median of 7.81X, as the charts below show.

Bottom Line

A stable economy and higher corporate spending should keep supporting the industry’s growth.

Three stocks in the Zacks Staffing Industry have a Zacks Rank #1 (Strong Buy) or 2 (Buy). Below, we have mentioned one more stock from this space that investors might hold on to.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s take a look at the stocks.

Resources Connection, Inc. (RECN - Free Report) ) : The stock of this California-based provider of business consulting services has a Zacks Rank #1. The Zacks Consensus Estimate for current year EPS has improved 14.1% in the past 90 days.

Price and Consensus: RECN

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 29.6% in the past year. The Zacks Consensus Estimate for current year EPS has increased 15.1% in the past 90 days. Currently, it carries a Zacks Rank #2.

Price and Consensus: HSII

 

Korn/Ferry International (KFY - Free Report) : The stock of this California-based provider of talent management solutions has climbed 1.6% in the past year. The Zacks Consensus Estimate for current year EPS has improved 2.2% in the past 90 days. Currently, it has a Zacks Rank #2.

Price and Consensus: KFY

Insperity, Inc. (NSP - Free Report) : The stock of this Texas-based provider of human resources (HR) and business solutions has gained 58.4% in the past year. The Zacks Consensus Estimate for current year EPS has improved 7.8% in the past 90 days. Currently, it carries a Zacks Rank #3 (Hold).

Price and Consensus: NSP

 

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