Chicago, IL – February 20, 2025 – Today, Zacks Equity Research discusses HireQuest, Inc. HQI, Heidrick & Struggles International, Inc. HSII and Cross Country Healthcare, Inc. CCRN.
The Staffing Firms industry is anticipated to attain its pre-pandemic levels gradually, allowing companies to pay regular dividends. The rising adoption of remote work and hybrid models, backed by top-notch technological advancements, will drive the demand for staffing agencies. HireQuest, Inc., Heidrick & Struggles International, Inc. and Cross Country Healthcare, Inc. are gaining from technological developments that improve efficiency.
Industry Description
The Zacks Staffing industry is a diverse sector encompassing companies that offer a 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 global reach, catering to a diverse client base, which includes domestic and international businesses across different sectors and industries.
What's Shaping the Future of the Business Services Industry?
Stable Demand: The industry is mature. The consistency in demand for services despite the economic downturn in the manufacturing sector has been robust for some time now. Revenues, income and cash flows are anticipated to gradually recover to the pre-pandemic level, allowing most industry players to pay out stable dividends.
Rising Adoption of Remote Work & Hybrid Models: A significant rise in remote work has been observed since the pandemic, and it has made staffing agencies focus on flexible staffing solutions, including hybrid and remote work models. These adaptations help meet the desires of clients and job seekers for a better work-life balance. Given the continued demand for remote work, staffing agencies are expected to prioritize and effectively meet evolving workplace preferences.
Tech-Driven Staffing Solutions on the Boom: The staffing sector is using technology to optimize operations, increase efficiency and deliver services at their highest quality. The growing adoption of AI-driven tools and platforms makes attracting, evaluating and onboarding IT talents more effective.
The rising adoption of social media and Big Data is being witnessed as well. Video-conferencing platforms, such as Zoom and Microsoft Teams, facilitate remote communication, and cloud and blockchain technologies bolster 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 #198. This rank places it in the bottom 20% of 249 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 17.4% against the S&P 500 composite’s growth of 24.2% and the broader sector’s rise of 29.5% in the same timeframe.
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 7.48X compared with the S&P 500’s 17.7X and the sector’s 27.05X.
Over the past five years, the industry has traded as high as 8.92X and as low as 7.28X, with the median being 7.95X.
3 Staffing Stocks Poised for Growth
We have presented three stocks that are expected to grow in the near term.
Heidrick & Struggles: This provider of executive search, consulting and on-demand talent services to businesses and business leaders is benefiting from improving segmental performance.
HSII’s core Executive Search business is benefiting from strong performances in the Americas and the Asia Pacific regions. Increasing average contract values indicating longer duration projects, along with a rising number of extensions with higher values, are aiding the On-Demand Talent business. Surging leadership assessment and development engagements, coupled with purpose-driven change solutions, are boosting organic revenues.
Heidrick & Struggles currently has a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2024 bottom line has increased from $2.67 to $2.68 in the past 90 days. Its shares have gained 17.5% in the past six months.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cross Country Healthcare: This talent management and other consultative services provider for healthcare clients is improving from the strength in its current relationships, and momentum in home care, physician staffing and education.
CCRN’s home care staffing business is benefiting from the rising number of PACE program wins, and the physician staffing business is growing from higher billable days and revenues per day sales. Improving operating leverage from volume growth and proactive cost management are driving the bottom line.
Cross Country Healthcare currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2024 EPS has increased from 52 cents to 53 cents in the past 90 days. CCRN shares have gained 28.6% in the past six months.
HireQuest: This temporary staffing services provider is riding on the strength and versatility of its franchise model. The increasing sales generated by HQI’s temporary staffing brands are driving franchise royalty.
HireQuest is well-positioned to drive improved financial performance, capitalizing on the stabilizing staffing market and employing disciplined expense management across its business. Headcount reductions made during 2023 related to the integration of MRI Network acquisition are instrumental toward lowering expenses.
HQI currently carries a Zacks Rank #3. The Zacks Consensus Estimate for the 2024 earnings has been unchanged at 28 cents per share in the past 90 days. The stock has gained 14.4% in the past six months.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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