The outsourcing and staffing services sector is well-positioned to grow significantly, owing to a growing demand for affordable and efficient recruitment processes, high demand for competent workers across several industries, and a global outsourcing trend.

Therefore, quality outsourcing stocks Kelly Services, Inc. (KELYA), Barrett Business Services, Inc. (BBSI), and DHI Group, Inc. (DHX) could be wise additions to your portfolio now.

Despite several macroeconomic challenges, outsourcing and staffing services remain in high demand as companies seek high-quality people across industries, including IT, healthcare, manufacturing, retail, and financial services.

The global business process outsourcing market is expected to grow at a CAGR of 9.4% until 2030. The focus of organizations on agility, efficiency, productivity, reduced time to market, and cost reduction drives the business process outsourcing industry. Growth is accelerated by SaaS-based solutions and process automation.

In addition, the global recruitment process outsourcing (RPO) market is expected to grow to $216.90 billion by 2027 at a CAGR of 17%. The market is growing steadily, with key players increasingly adopting strategies.

The outsourcing industry benefits from cloud computing usage, the work-from-home trend, the hybrid working model, and greater demand for operational efficiency and market speed.

Let’s delve deeper into the fundamentals of the featured stocks.

Kelly Services, Inc. (KELYA)

KELYA together with its subsidiaries, provides workforce solutions to various industries. The company operates through five segments: Professional & Industrial; Science, Engineering & Technology; Education; Outsourcing & Consulting; and International.

KELYA’s forward EV/Sales of 0.12x is 93.3% lower than the industry average of 1.82x. Its forward Price/Sales of 0.13x is 90.6% lower than the industry average of 1.40x.

KELYA’s trailing-12-month asset turnover ratio of 1.84x is 131.5% higher than the industry average of 0.79x.

For the first quarter ended April 2, 2023, KELYA’s net earnings came in at $10.90 million, compared to a net loss of $47.60 million in the prior year. Also, its EPS amounted to $0.29, compared to a loss per share of $1.23 in the same quarter.

Also, its total current liabilities came in at $1.05 billion for the period that ended April 2, 2023, compared to $1.13 billion for the period that ended January 1, 2023.

Analysts expect KELYA’s revenue to increase marginally year-over-year to $5.01 billion for the year ending December 2023. Its EPS is expected to grow 19% year-over-year to $1.58 for the same period. It surpassed EPS estimates in all four trailing quarters. KELYA’s stock has gained 16.3% over the past nine months to close its last trading session at $18.08.

KELYA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

KELYA has a B grade for Value. Within the B-rated Outsourcing – Staffing Services industry, it is ranked #5 out of 20 stocks. Click here for the additional POWR Ratings for Growth, Momentum, Stability, Sentiment and Quality for KELYA.

Barrett Business Services, Inc. (BBSI)

BBSI provides business management solutions for small and mid-sized companies in the United States.

BBSI’s forward EV/Sales of 0.46x is 74.8% lower than the industry average of 1.82x. Its forward EV/EBIT of 8.71x is 44.3% lower than the industry average of 15.64x.

BBSI’s trailing-12-month ROCE of 26.61% is 91.6% higher than the industry average of 13.89%. Its trailing-12-month ROTC of 18.45% is 160.8% higher than the industry average of 7.07%.

BBSI’s total revenues increased marginally year-over-year to $264.63 million for the second quarter that ended June 30, 2023, while its gross margin increased marginally from the year-ago value to $67.05 million.

Also, its total liabilities came in at $671.90 million for the period that ended June 30, 2023, compared to $686.94 million for the period that ended December 31, 2022.

Street expects BBSI’s revenue to increase 2.9% year-over-year to $1.09 billion for the year ending December 31, 2023. Its EPS is expected to grow marginally year-over-year to $6.60 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 14.5% to close the last trading session at $92.49.

BBSI’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. It has an A grade for Value and Sentiment. It is ranked #2 in the same industry.

Beyond what is stated above, we’ve also rated BBSI for Stability, Growth, Momentum and Quality. Get all BBSI ratings here.

DHI Group, Inc. (DHX)

DHX provides data, insights, and employment connections through specialized services for technology professionals in the United States.

DHX’s forward EV/Sales of 1.41x is 23.1% lower than the industry average of 1.84x. Its forward Price/Sales multiple of 1.10 is 11.3% lower than the industry average of 1.25.

DHX’s trailing-12-month CAPEX / Sales of 12.16% is 197.5% higher than the 4.09% industry average. Its trailing-12-month asset turnover ratio of 0.67x is 35.3% higher than the 0.49x industry average.

For the fiscal second quarter ended June 30, 2023, DHX’s revenue increased 4% year-over-year to $38.54 million. Its total current liabilities came in at $67.03 million for the period that ended June 30, 2023, compared to $74.08 million for the period that ended December 31, 2022.

Also, its other long-term liabilities came in at $530,000, compared to $932,000 for the same period.

DHX’s revenue is expected to increase 3.8% year-over-year to $155.40 million for the year ending December 2023. Its EPS is expected to grow 20% year-over-year to $0.06 for the same quarter. The stock has gained 11.4% over the past three months to close the last trading session at $3.92.

DHX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It is ranked first in the same industry. It has an A grade for Sentiment and a B for Value, Stability and Quality. To see additional DHX’s rating for Growth and Momentum, click here.

What To Do Next?

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KELYA shares were trading at $18.34 per share on Friday morning, up $0.26 (+1.44%). Year-to-date, KELYA has gained 9.44%, versus a 18.90% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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