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Here are 3 Staffing Stocks to Consider Despite Industry Woes
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The Staffing Firms industry is expected to recover to its pre-pandemic levels eventually, allowing companies to pay out regular dividends. The frequent adoption of remote work and hybrid models, backed by top-notch technological advancements, will drive the demand for staffing agencies. Korn Ferry (KFY - Free Report) , Kelly (KELYA - Free Report) and HireQuest, Inc. (HQI - Free Report) are benefiting from technological developments that improve efficiency.
Industry Description
The Zacks Staffing industry is a diverse sector encompassing companies that offer a comprehensive range of human resources and workforce solutions. These services cover various aspects of personnel management, including employment screening, recruitment services for both temporary and long-term job placements, retirement planning, human capital management, payroll administration, performance evaluation, organizational planning, and financial management. Some firms within this industry provide specialized services, such as staffing and risk consulting, professional staffing, and global business solutions tailored to the needs of small to medium-sized enterprises. They also offer organizational consulting services with a worldwide reach, catering to a wide and varied client base, which includes domestic and international businesses.
What's Shaping the Future of the Business Services Industry?
Stable Demand: The industry is mature. The consistency in demand for services has been strong for a while despite challenges in the manufacturing sector. Revenues, income and cash flows are expected to recover to the pre-pandemic levels gradually, allowing most industry players to pay out stable dividends.
Increasing Adoption of Remote Work & Hybrid Models: A significant boost in remote work has been witnessed since the pandemic, and it has made staffing agencies focus on flexible staffing solutions, including hybrid and remote work models. These adaptations assist clients and job-seekers to enjoy a better work-life balance. Given the continued demand for remote work, staffing agencies are anticipated to prioritize and meet evolving workplace preferences efficiently.
Tech-Driven Staffing Solutions on the Rise: The staffing sector is implementing technological advancements to optimize operations, boost efficiency and deliver services at their highest quality. The rising adoption of AI-driven tools and platforms makes attracting, evaluating and onboarding IT talents more effective. The increasing acceptance of social media and Big Data is being witnessed as well. Video-conferencing platforms, such as Zoom and Microsoft Teams, help in remote communication, and cloud and blockchain technologies improve HR data security. Such technological advancements ensure that the demand for staffing services continues.
Zacks Industry Rank Indicates Sluggish Near-Term Prospects
The Zacks Staffing Firms industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #226. This rank places it in the bottom 8% of 246 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates a continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock market performance and current valuation.
Industry Lags Sector & S&P 500
The Zacks Staffing Firms industry has underperformed the S&P 500 and the broader sector over the past year.
The industry has declined 33.5% against the S&P 500 composite’s growth of 7.9% and the broader sector’s rise of 9.4% in the same timeframe.
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 5.56X compared with the S&P 500’s 15.1X and the sector’s 11.7X.
Over the past five years, the industry has traded as high as 13.27X and as low as 4.17X, with the median being 7.46X, as the charts below show.
EV-to-EBITDA
3 Staffing Stocks Poised for Growth
We have presented three stocks that are expected to grow in the near term.
Kelly: This company provides workforce solutions to various industries. The top line is gaining from the education segment’s growth and expansion of the company’s higher-margin therapy business via the Children’s Therapy Center buyout.
Improving fill rate and higher bill rates in existing businesses, and customer wins are fueling the education segment. The science, engineering and technology segment of the company is growing on the back of Motion Recruitment Partners’ buyout. The outsourcing and consulting group segment is improving due to the strong performance by payroll processing outsourcing.
KELYA’s omnichannel strategy is enhancing staffing revenues. Outcome-based specialties revenues are being driven by robust demand in semiconductors, logistics, manufacturing and distribution. The company’s bottom line is gaining from a decline in selling, general and administrative expenses, reflecting its efforts to aid productivity and align resource levels with volumes in a better way.
Kelly currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2025 earnings has been unchanged at $2.33 per share in the past 30 days.
Korn Ferry: This organizational consulting services provider is benefiting from positive inflection in executive search and recruitment process outsourcing growth.
The top line is driven by strong marquee and diamond account wins, mainly in healthcare and life sciences. Executive search revenues are witnessing strong demand in the North America region.
The consulting business is contributing fairly to top-line growth as it is bringing in hefty engagements, representing nearly 41% of new business in the third quarter of fiscal 2025. Also, an increase in the hourly bill rate is significantly boosting consulting revenues.
KFY currently has a Zacks Rank #3. The Zacks Consensus Estimate for the 2025 earnings has been unchanged at $4.38 per share in the past 30 days.
Price and Consensus: KFY
HireQuest: This company provides temporary staffing services in the United States. HQI’s flexible franchise model is allowing it to drive profitable results.
Acquisitions are vital parts of the company’s broader strategy, and its franchise model allows it to identify and acquire businesses efficiently, in turn, expanding its staffing footprint and boosting the scope of offerings. HireQuest’s credit facility is providing it with the flexibility and breadth for short-term working capital requirements and the capacity to capitalize on potential buyouts.
The bottom line is benefiting from a reduction in selling, general and administrative expenses facilitated by the decline in workers’ compensation expenses.
HQI currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the 2025 earnings has been unchanged at 68 cents per share in the past 30 days.
Price and Consensus: HQI
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Here are 3 Staffing Stocks to Consider Despite Industry Woes
The Staffing Firms industry is expected to recover to its pre-pandemic levels eventually, allowing companies to pay out regular dividends. The frequent adoption of remote work and hybrid models, backed by top-notch technological advancements, will drive the demand for staffing agencies. Korn Ferry (KFY - Free Report) , Kelly (KELYA - Free Report) and HireQuest, Inc. (HQI - Free Report) are benefiting from technological developments that improve efficiency.
Industry Description
The Zacks Staffing industry is a diverse sector encompassing companies that offer a comprehensive range of human resources and workforce solutions. These services cover various aspects of personnel management, including employment screening, recruitment services for both temporary and long-term job placements, retirement planning, human capital management, payroll administration, performance evaluation, organizational planning, and financial management. Some firms within this industry provide specialized services, such as staffing and risk consulting, professional staffing, and global business solutions tailored to the needs of small to medium-sized enterprises. They also offer organizational consulting services with a worldwide reach, catering to a wide and varied client base, which includes domestic and international businesses.
What's Shaping the Future of the Business Services Industry?
Stable Demand: The industry is mature. The consistency in demand for services has been strong for a while despite challenges in the manufacturing sector. Revenues, income and cash flows are expected to recover to the pre-pandemic levels gradually, allowing most industry players to pay out stable dividends.
Increasing Adoption of Remote Work & Hybrid Models: A significant boost in remote work has been witnessed since the pandemic, and it has made staffing agencies focus on flexible staffing solutions, including hybrid and remote work models. These adaptations assist clients and job-seekers to enjoy a better work-life balance. Given the continued demand for remote work, staffing agencies are anticipated to prioritize and meet evolving workplace preferences efficiently.
Tech-Driven Staffing Solutions on the Rise: The staffing sector is implementing technological advancements to optimize operations, boost efficiency and deliver services at their highest quality. The rising adoption of AI-driven tools and platforms makes attracting, evaluating and onboarding IT talents more effective. The increasing acceptance of social media and Big Data is being witnessed as well. Video-conferencing platforms, such as Zoom and Microsoft Teams, help in remote communication, and cloud and blockchain technologies improve HR data security. Such technological advancements ensure that the demand for staffing services continues.
Zacks Industry Rank Indicates Sluggish Near-Term Prospects
The Zacks Staffing Firms industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #226. This rank places it in the bottom 8% of 246 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates a continued outperformance in the near term. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock market performance and current valuation.
Industry Lags Sector & S&P 500
The Zacks Staffing Firms industry has underperformed the S&P 500 and the broader sector over the past year.
The industry has declined 33.5% against the S&P 500 composite’s growth of 7.9% and the broader sector’s rise of 9.4% in the same timeframe.
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 5.56X compared with the S&P 500’s 15.1X and the sector’s 11.7X.
Over the past five years, the industry has traded as high as 13.27X and as low as 4.17X, with the median being 7.46X, as the charts below show.
EV-to-EBITDA
3 Staffing Stocks Poised for Growth
We have presented three stocks that are expected to grow in the near term.
Kelly: This company provides workforce solutions to various industries. The top line is gaining from the education segment’s growth and expansion of the company’s higher-margin therapy business via the Children’s Therapy Center buyout.
Improving fill rate and higher bill rates in existing businesses, and customer wins are fueling the education segment. The science, engineering and technology segment of the company is growing on the back of Motion Recruitment Partners’ buyout. The outsourcing and consulting group segment is improving due to the strong performance by payroll processing outsourcing.
KELYA’s omnichannel strategy is enhancing staffing revenues. Outcome-based specialties revenues are being driven by robust demand in semiconductors, logistics, manufacturing and distribution. The company’s bottom line is gaining from a decline in selling, general and administrative expenses, reflecting its efforts to aid productivity and align resource levels with volumes in a better way.
Kelly currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2025 earnings has been unchanged at $2.33 per share in the past 30 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: KELYA
Korn Ferry: This organizational consulting services provider is benefiting from positive inflection in executive search and recruitment process outsourcing growth.
The top line is driven by strong marquee and diamond account wins, mainly in healthcare and life sciences. Executive search revenues are witnessing strong demand in the North America region.
The consulting business is contributing fairly to top-line growth as it is bringing in hefty engagements, representing nearly 41% of new business in the third quarter of fiscal 2025. Also, an increase in the hourly bill rate is significantly boosting consulting revenues.
KFY currently has a Zacks Rank #3. The Zacks Consensus Estimate for the 2025 earnings has been unchanged at $4.38 per share in the past 30 days.
Price and Consensus: KFY
HireQuest: This company provides temporary staffing services in the United States. HQI’s flexible franchise model is allowing it to drive profitable results.
Acquisitions are vital parts of the company’s broader strategy, and its franchise model allows it to identify and acquire businesses efficiently, in turn, expanding its staffing footprint and boosting the scope of offerings. HireQuest’s credit facility is providing it with the flexibility and breadth for short-term working capital requirements and the capacity to capitalize on potential buyouts.
The bottom line is benefiting from a reduction in selling, general and administrative expenses facilitated by the decline in workers’ compensation expenses.
HQI currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the 2025 earnings has been unchanged at 68 cents per share in the past 30 days.
Price and Consensus: HQI