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Dull Near-Term Outlook Diminishes Staffing Industry's Appeal
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Companies in the Zacks Staffing industry 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.
One prominent player from the industry is Robert Half International (RHI - Free Report) , a provider of staffing and risk consulting services in North America, South America, Europe, Asia, and Australia.
Here are the industry’s three major themes:
Revenues and cash flow have grown steadily over the past few years, enabling most industry players to pay out stable dividends. The staffing industry stands to benefit from the health of the broader economy, which is currently stable and is expected to remain so in the rest of the year. Per the “third” estimate released by the Bureau of Economic Analysis on Sep 26, GDP grew at an annualized rate of 2% in the second quarter of 2019, same as the “second” estimate released in August. The Fed expects GDP to grow 2.2% in 2019 and 2% in 2020.
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 tight labor market, employers are reluctant to let go of 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 #182. This rank places it in the bottom 28% 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 bleak near-term 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 1.2%.
Despite the dull 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 15.7% over this period against 3.1% rally of the broader sector and 0.3% 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 7.23X compared with the S&P 500’s 11.15X and the sector’s 11.36X.
Over the past five years, the industry has traded as high as 9.82X, as low as 5.62X and at the median of 7.73X, as the charts below show.
EV-to-EBITDA
Bottom Line
Economic strength and stability have led to additional hiring and wage increase, thus benefiting the staffing industry. However, higher talent cost due to a competitive labor market and lack of skilled labor are concerns.
BG Staffing, Inc. (BGSF - Free Report) : This Texas-based company provides temporary staffing services in the United States.Currently, it carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has improved 6.3% in the past 60 days.
Price and Consensus: BGSF
Heidrick & Struggles International, Inc. (HSII - Free Report) : This Illinois-based company provides executive search and consulting services to businesses and business leaders in the Americas, Europe, the Asia Pacific, and internationally. Currently, it carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has increased 0.4% in the past 60 days.
Price and Consensus: HSII
Insperity, Inc. (NSP - Free Report) : This Texas-based company provides human resources (HR) and business solutions to enhance business performance for small and medium-sized businesses. Currently, it carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has remained unchanged in the past 60 days.
Price and Consensus: NSP
Today's Best Stocks from Zacks
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
Image: Bigstock
Dull Near-Term Outlook Diminishes Staffing Industry's Appeal
Companies in the Zacks Staffing industry 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.
One prominent player from the industry is Robert Half International (RHI - Free Report) , a provider of staffing and risk consulting services in North America, South America, Europe, Asia, and Australia.
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 #182. This rank places it in the bottom 28% 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 bleak near-term 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 1.2%.
Despite the dull 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 15.7% over this period against 3.1% rally of the broader sector and 0.3% 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 7.23X compared with the S&P 500’s 11.15X and the sector’s 11.36X.
Over the past five years, the industry has traded as high as 9.82X, as low as 5.62X and at the median of 7.73X, as the charts below show.
EV-to-EBITDA
Bottom Line
Economic strength and stability have led to additional hiring and wage increase, thus benefiting the staffing industry. However, higher talent cost due to a competitive labor market and lack of skilled labor are concerns.
Below we have mentioned three stocks from the staffing industry, which we believe investors should retain in their portfolio as they carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s take a look at the stocks.
BG Staffing, Inc. (BGSF - Free Report) : This Texas-based company provides temporary staffing services in the United States.Currently, it carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has improved 6.3% in the past 60 days.
Price and Consensus: BGSF
Heidrick & Struggles International, Inc. (HSII - Free Report) : This Illinois-based company provides executive search and consulting services to businesses and business leaders in the Americas, Europe, the Asia Pacific, and internationally. Currently, it carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has increased 0.4% in the past 60 days.
Price and Consensus: HSII
Insperity, Inc. (NSP - Free Report) : This Texas-based company provides human resources (HR) and business solutions to enhance business performance for small and medium-sized businesses. Currently, it carries a Zacks Rank #3. The Zacks Consensus Estimate for current year EPS has remained unchanged in the past 60 days.
Price and Consensus: NSP
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>