Here Are 3 Staffing Stocks to Consider Amid Industry Woes
While service activities are currently in good shape, their positive impacts on the Staffing Firms industry are being partially offset by contracting economic activity in the manufacturing sector. Successful remote work and increased use of technology are helping Randstad N.V. RANJY, Korn Ferry KFY and DLH Holdings Corp. DLHC.
About the Industry
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. Additionally, 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 global reach, catering to a wide and varied client base, which includes domestic and international businesses.
4 Factors Influencing the Future of Staffing Industry
Stable Demand: The industry is mature, with demand for services remaining stable over time. Revenues, income and cash flows are anticipated to gradually reach the pre-pandemic levels, aiding most industry players to pay out stable dividends.
Increased Adoption of Remote Work and Hybrid Models: The swift increase in remote work since the pandemic has led staffing agencies to prioritize flexible staffing solutions, including remote and hybrid models. These adaptations align with the desires of both clients and job seekers for improved work-life balance. With the continued prevalence of remote work, staffing agencies are anticipated to prioritize and effectively meet evolving workplace preferences.
Technology Usage Gaining Traction in Staffing: The staffing sector is progressively using technology to optimize operations, improve efficiency and deliver superior services. The adoption of tech-driven recruitment approaches, including AI, social media and Big Data, is increasing. Video-conferencing platforms such as Zoom and Microsoft Teams facilitate remote communication, and cloud and blockchain technologies bolster HR data security. This ensures a continued demand for staffing services.
Zacks Industry Rank Indicates Disappointing Future
The Zacks Staffing Firms industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #194. This rank places it in the bottom 23% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates 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.
The 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 43%.
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's Price Performance
The Zacks Staffing Firms industry has lagged the broader Zacks Business Services sector and the Zacks S&P 500 composite over the past year.
The industry has gained 0.7% over this period compared with the 30% growth of the broader sector and the 32% increase 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 7.6X compared with the S&P 500’s 14.84X and the sector’s 30.78X.
Over the past five years, the industry has traded as high as 13.27X and as low as 3.63X, with a median of 6.92X, as the charts below show.
EV-to-EBITDA
3 Staffing Stocks to Keep a Close Eye on
Amid the tough times for the staffing industry, here are a few hand-selected stocks that are poised to benefit in the near term.
Korn Ferry: The company, sporting a Zacks Rank #1 (Strong Buy) at present, is the premier global executive recruitment firm and operates on a retained basis, addressing recruitment needs from middle to executive management. Serving a diverse clientele, including major corporations, middle-market firms and governmental entities, KFY is renowned for its extensive global presence and leadership in the executive recruitment industry.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Korn Ferry excels in global executive search, offering comprehensive talent solutions, industry specialization, technology integration and a focus on diversity. With a reputation for client-centricity and research-driven insights, the firm delivers personalized and effective organizational consulting services.
For 2024, the Zacks Consensus Estimate for KFY’s earnings is pegged at $4.17, revised northward by 6.1% in the past 60 days.
DLH Holdings: This Zacks Rank #2 (Buy) company is a provider of technology-enabled business process outsourcing, program management solutions and public health research and analytics services.
The company’s top line is currently benefiting from the 2022 acquisition of GRSi. The acquisition has strengthened DLH’s information technology and engineering capabilities thereby equipping it more efficiently in the competitive marketplace.
For 2024, the Zacks Consensus Estimate for DLHC’s earnings is pegged at 55 cents, revised northward by 1.9% in the past 60 days.
Randstad N.V.: This Zacks Rank #2 company is a provider of temporary staffing and permanent placement services, job posting and résumé services on digital platforms.
For 2024, the Zacks Consensus Estimate for Randstad’s earnings is pegged at $2.09, revised northward by 2.5% in the past 60 days.
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Randstad Holding NV (RANJY) : Free Stock Analysis Report
Korn/Ferry International (KFY) : Free Stock Analysis Report
DLH Holdings Corp. (DLHC) : Free Stock Analysis Report
