Despite near-term macro uncertainty, the outsourcing and staffing services sector’s long-term prospects look promising, driven by sustained demand as companies worldwide look for highly skilled professionals, flexible workforce, cost savings, operational efficiency, and competitive benefits.

Therefore, it could be wise to invest in fundamentally sound outsourcing stocks Resources Connection, Inc. (RGP), Hudson Global, Inc. (HSON), and GEE Group Inc. (JOB) for solid returns.

Despite several macroeconomic headwinds, outsourcing and staffing services remain in strong demand as companies continue to seek high-quality talents across various industries, including IT, healthcare, manufacturing, retail, and financial services.

By delegating non-core tasks to external specialists, companies in these industries have improved efficiency, flexibility, and access to specialized skills through outsourcing. Moreover, many organizations around the globe rely on outsourcing and staffing services to speed up hiring processes and reduce costs while keeping their businesses productive.

According to Reports and Data, the global recruitment process outsourcing (RPO) market size was $8.38 billion in 2022 and is expected to reach $36.07 billion in 2032, growing at a CAGR of 17%. RPO service providers offer various services, such as candidate sourcing, screening, selection, onboarding, and retention, that assist businesses in streamlining their hiring procedures.

The growing need for effective recruiting processes and the rising trend of outsourcing recruitment processes to third-party service providers should boost the RPO market’s growth. Also, RPO providers are implementing innovative technologies, including AI, ML, and big data analytics for self-scheduling interviews, channelizing better candidate engagement, and automating several recruitment tasks.

Furthermore, the expansion of the recruitment process outsourcing market is fueled by the requirement for compliance with numerous labor laws and regulations. The complicated legal and regulatory requirements involved in the hiring procedure can be easily handled by RPO service providers, ensuring that organizations follow all laws and regulations.

Against the backdrop, robust outsourcing stocks RGP, HSON, and JOB could be ideal additions to one’s portfolio.

Let’s take a closer look at the fundamentals of these stocks:

Resources Connection, Inc. (RGP)

RGP offers consulting services to business customers under the Resources Global Professionals name in North America, Europe, and Asia Pacific. The company provides services in the areas of transactions such as integration and divestitures, bankruptcy/restructuring, financial process optimization, internal audit and compliance, and regulatory compliance.

In terms of forward non-GAAP P/E, RGP’s 11.46x is 36.2% lower than the 17.96x industry average. Likewise, its forward EV/Sales multiple of 0.61 is 66.7% lower than the industry average of 1.82. Also, the stock’s forward Price/Sales of 0.74x is 47.4% lower than the 1.41x industry average.

For the fiscal year that ended May 27, 2023, RGP’s same-day constant currency revenue was up 1.1% year-over-year excluding taskforce. Its gross margin increased by 110 basis points to 40.4%, driven by the 220-basis points improvement in pay/bill ratio as the company’s pricing initiative continued to yield positive results as a result of taskforce divestiture.

Despite a challenging macro environment throughout the year, the company delivered net income of $54.40 million (net income margin of 7%), earnings per common share of $1.59, and a strong adjusted EBITDA margin of 12.9%.

After finishing the year with organic revenue growth year-over-year while delivering solid profitability, RGP is poised for continued robust growth this year and beyond.

“We are excited to continue improving the company for the long term with investments in consultant experience, client services and technology, including a cloud-based enterprise resource planning system, a talent acquisition and management system, and our digital engagement platform, HUGO by RGP®. We stand ready to accelerate our growth as the economy improves with inflation moderating and interest rates stabilizing,” said Kate W. Duchene, RGP’s CEO.

Street expects RGP’s revenue for the fiscal year (ending May 2025) to increase 7.9% year-over-year to $781.85 million. Likewise, the consensus EPS estimate of $1.56 for the next year indicates a 55.7% rise year-over-year. In addition, the company topped the consensus revenue and EPS estimates in all four trailing quarters.

RGP’s stock has gained 9.5% over the past three months to close the last trading session at $15.98.

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

RGP has a grade A for Value and a B for Quality. It is ranked #2 out of 20 stocks in the B-rated Outsourcing – Staffing Services industry.

Beyond what we stated above, we also have RGP’s ratings for Momentum, Sentiment, Stability and Growth. Get all RGP ratings here.

Hudson Global, Inc. (HSON)

HSON offers talent solutions for mid-to-large-cap multinational companies and government agencies under the Hudson RPO brand in the Americas, the Asia Pacific, and Europe. The company provides recruitment process outsourcing (RPO) services, like recruitment outsourcing, project-based outsourcing, and contingent workforce solutions.

HSON’s forward non-GAAP P/E of 9.88x is 45% lower than the 17.96x industry average. Its forward EV/Sales of 0.23x is 87.4% lower than the 1.82x industry average. Also, the stock’s forward Price/Sales multiple of 0.33 is 76.8% lower than the industry average of 1.41.

In the first quarter that ended Match 31, 2023, HSON’s adjusted net revenue in the Europe segment increased 19.8% year-over-year to $4.38 million and adjusted EBITDA was $546 thousand, up 75.6% year-over-year. The company ended the first quarter of 2023 with $22.30 million in cash, including $400 million in restricted cash.

In addition, as of March 31, 2023, the company’s total liabilities reduced to $19.07 million, compared to $22.15 million as of December 31, 2022.

Analysts expect HSON’s revenue for the third quarter (ending September 2023) to increase 7.8% year-over-year to $52.48 million. The company’s EPS for the ongoing quarter is expected to grow 25.9% year-over-year to $0.73. In addition, its revenue and EPS for the fiscal year 2024 are expected to grow 8.4% and 45.6% from the prior year to $212.32 million and $3.32, respectively.

Over the past month, the stock has gained 4.2% to close the last trading session at $22.52.

HSON’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

HSON is ranked first among 22 stocks in the A-rated Outsourcing – Staffing Services industry. The stock has an A grade for Value and Sentiment. It also has a B grade for Quality.

To see the other ratings of HSON for Growth, Momentum, and Stability, click here.

GEE Group Inc. (JOB)

JOB offers permanent and temporary professional and industrial staffing and placement services. The company operates in two segments: Industrial Staffing Services and Professional Staffing Services. It provides placement of information technology, accounting, finance, engineering, and medical professionals for direct hire and contract staffing services.

On June 20, JOB announced that it had repurchased 647,000 shares of the company’s common stock in a series of open market share repurchases that began on May 22, 2023. Recently, JOB’s Borad of Directors authorized to purchase up to $20 million of the company’s outstanding shares of common stock, no par value.

Derek Dewan, Chairman and CEO of JOB, said, “We remain committed to optimizing capital deployment, including execution of these share repurchases under present conditions, as well as drive long-term, profitable, organic growth augmented by strategic acquisitions executed using a disciplined pricing approach.”

In terms of forward P/E, JOB’s 11.78x is 44.2% lower than the 21.10x industry average. Its forward EV/Sales of 0.24x is 86.8% lower than the 1.82x industry average. Also, the stock’s forward Price/Sales of 0.34x is 76.2% lower than the 1.41x industry average.

JOB reported net revenues of $80.01 million for the six months ended March 31, 2023. The company’s income from operations was $1.46 million, an increase of 26.6% year-over-year. As of March 31, 2023, its cash stood at $20.10 million, compared to $18.85 million as of September 30, 2022. Also, its total liabilities lowered to $15.29 million, compared to $18.55 million as of September 30, 2022.

Analysts expect JOB’s revenue to increase 4.2% year-over-year to $166.01 million for the fiscal year ending September 2024. Also, the consensus EPS estimate of $0.10 for the same period reflects a 150% year-over-year improvement.

Shares of JOB have declined 2.7% year-to-date to close the last trading session at $0.47.

JOB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system.

JOB has a grade A for Value and a B for Stability, and Sentiment. The stock is ranked #2 in the same industry.

In addition to the POWR Ratings I’ve just highlighted, you can see JOB’s ratings for Momentum, Quality, Momentum, and Growth here.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

RGP shares were unchanged in premarket trading Tuesday. Year-to-date, RGP has declined -11.55%, versus a 20.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

More Resources for the Stocks in this Article