Outsourcing has become more than a simple cost-reduction technique with the migrations and options of cloud services. Given the rosy prospects of the industry, investors could consider watching quality outsourcing stocks Randstad N.V. (RANJY), Heidrick & Struggles International, Inc. (HSII), and RCM Technologies, Inc. (RCMT).
Outsourcing can be viewed as a mechanism to reconfigure a firm’s value chain effectively while allowing it to sustain future market dominance. The growing adoption of virtualization across organizations has made cost-effective outsourcing services popular. As a result, the global outsourcing services market is expected to grow at a CAGR of 5.5% until 2027.
Moreover, Business Process Outsourcing (BPO) has witnessed significant changes due to the high adoption of cloud computing in the U.S. market. The delivery of BPO services has transformed mainly owing to the rising popularity of cloud computing, which provides numerous benefits to businesses.
In addition, the cost-effectiveness of cloud computing is one of the main factors contributing to its increasing popularity in BPO. The U.S. business process outsourcing market is expected to grow at a CAGR of 9.1% until 2030.
Also, leading IT companies are experiencing growing demand to assist clients with application modernization and maintenance, cloud enablement, and managed security services. In addition, clients continue to be focused on transforming their operations through automation and AI, data, and analytics to drive operational cost savings and productivity.
The IT Outsourcing Market is expected to grow at a CAGR of 3.7% until 2028.
Let’s discuss the stocks mentioned above in detail:
Randstad N.V. (RANJY)
Headquartered in Diemen, the Netherlands, RANJY provides solutions in the field of work and human resources services. It offers temporary staffing and permanent placement services for the light industrial, office and administrative, manufacturing and logistics, and other specialty areas, as well as payroll services.
RANJY pays $2.94 annually as dividends. This translates to a yield of 5.41% at the current price, compared to the 4-year average dividend yield of 5.87%.
RANJY’s trailing-12-month return on common equity of 18.04% is 29.9% higher than the 13.89% industry average. Its trailing-12-month asset turnover ratio of 2.47x is 211.4% higher than the 0.79x industry average.
RANJY’s revenue came to €6.47 billion ($7.07 billion) in the fiscal second quarter that ended March 31, 2023. Its EBITA came in at €217 million ($237.34 million). The company’s net income amounted to €137 million ($149.84 million), while earnings per ordinary share came in at €1.01.
Street expects RANJY’s revenue to increase marginally year-over-year to $7.07 billion in the fiscal third quarter ending September 2023.
Over the past year, the stock has gained 22.6% to close the last trading session at $29.10.
RANJY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Stability and Value. It is ranked #7 in the 20-stock in the B-rated Outsourcing - Staffing Services industry.
To access additional ratings for RANJY’s Growth, Quality, Sentiment, and Momentum, click here.
Heidrick & Struggles International, Inc. (HSII)
HSII provides executive search, consulting, and on-demand talent services to businesses and business leaders worldwide.
On July 31, 2023, HSII declared a quarterly dividend of $0.15, payable on August 25. HSII pays $0.60 annually as dividends. This translates to a yield of 2.14% at the current price, compared to the 4-year average dividend yield of 2.02%.
HSII’s trailing-12-month ROTC of 15.42% is 11% higher than the 13.89% industry average. Its trailing-12-month asset turnover ratio of 1.03x is 29.7% higher than the 0.79x industry average.
HSII’s total revenue for the fiscal first quarter ended March 30, 2023 came to $242.12 million. The company’s operating income came to $17.78 million. Additionally, its net income came in at $15.59 million and earnings per common share stood at $0.76.
Analysts expect HSII’s revenue to be $250.63 million for the fiscal third quarter ending September 2023. Its EPS is expected to be $0.72 for the same quarter. Also, it has surpassed EPS estimates in each of the trailing four quarters, which is remarkable.
HSII’s shares have gained 12.1% over the past three months to close the last trading session at $28.09.
HSII’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value. It is ranked #8 in the same industry.
Beyond what is stated above, we’ve also rated for Sentiment, Growth, Stability, Quality, and Momentum. Get all HSII ratings here.
RCM Technologies, Inc. (RCMT)
RCMT provides business and technology solutions. It operates through three segments: Engineering; Specialty Health Care; and Life Sciences and Information Technology. The company’s clients come from various industries, including aerospace, defense, energy, financial services, healthcare, manufacturing, and technology.
On May 15, 2023, RCMT announced the opening of the RCM Energy Services Operation Centre in Eschborn / Frankfurt am Main, Germany. The expansion within Europe comes as part of the strategic plan to increase the global footprint of the group and become a preferred engineering partner for the energy transition and grid of the future.
Its trailing-12-month net income margin of 6.75% is 8% higher than the 6.25% industry average. Its trailing-12-month asset turnover ratio of 2.97x is 274.2% higher than the 0.79x industry average.
RCMT’s revenue came in at $67.12 million in the fiscal first quarter that ended April 30, 2023. Its gross profit came to $19.02 million. The company’s net income reached $3.84 million, and its EPS stood at $0.41.
Street expects RCMT’s revenue to be $66.89 million in the fiscal second quarter ended June 2023. The company’s EPS for the same quarter is expected to be $0.43. Furthermore, the company surpassed its consensus EPS estimates in three of the trailing four quarters.
The stock has gained 63.6% over the past three months to close the last trading session at $20.11.
RCMT’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
RCMT has a B grade in Quality and Value. It is ranked #6 in the same industry.
Click here to see the additional POWR Ratings for RCMT (Momentum, Value, Stability, and Stability).
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RANJY shares were trading at $29.20 per share on Friday morning, up $0.10 (+0.34%). Year-to-date, RANJY has declined -0.37%, versus a 18.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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