3 Stocks to Buy as the Job Market Roars Back

Many parts of the economy have not only fully recovered from the coronavirus pandemic but are at all-time highs.  For example, the median price for an existing home in the U.S. hit a new record high at $363,300 in July and the Dow Jones, S&P 500, and Nasdaq hit record highs this month.

However, other parts of the economy are lagging and haven’t fully made up losses incurred from the pandemic.  The most notable example is the labor market. During the pandemic, the US economy shed about 22 million jobs. Since then, we have recovered about 16 million jobs which means the US economy remains short of about 6 million jobs. Of course, the figure is higher if we also account for population growth with an average of 100,000 people entering the labor force.

Despite recent concerns about the Delta Variant, there are some reasons to be optimistic about the jobs picture. The combination of enhanced unemployment benefits expiring in September and school reopening is expected to help the US economy close the jobs gap. Other indicators like job openings and the quits rate are also at multi year highs and are indications of a strong labor market. As the economy keeps adding jobs and returns to full employment, the following 3 stocks should outperform: Kforce, Inc. (KFRC), Robert Half International (RHI), and ManpowerGroup (MAN).

Kforce, Inc. (KFRC)

Kforce Inc. provides professional staffing services and solutions in the United States. It has various segments including Technology, Finance, and Accounting. The company was founded in 1962 and is headquartered in Tampa, Florida.

KFRC has nearly tripled from its lows in March 2020 and is up 61% over the last year. Since early May, the stock has been trading in a tight range between $55 and $65. These types of sideways consolidations following meaty advances tend to resolve higher during bull markets.

And, the chances of an upside breakout are obviously enhanced when companies are posting strong earnings as it is with KFRC. In Q2, the company topped EPS expectations by reporting $1 per share, beating consensus expectations of $0.91 per share and a more than 100% improvement from last year. Revenue also beat at $403 million vs expectations of $392 million. This was a significant improvement from last year’s $340 million.

Despite such strong growth, KFRC is attractive from a value perspective with a forward P/E ratio of 17 which is below the market average. The POWR Ratings are also bullish on the stock as it’s rated an A which translates to a Strong Buy. The stock also has a Value grade of B which isn’t surprising considering its attractive P/E and 1.5% dividend which was recently hiked. To see more of KFRC’s POWR Ratings, click here. 

Robert Half International (RHI)

RHI has various segments such as temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services, and it operates in the United States, Europe, Asia, and Australia. The stock has been quite strong with an 83% gain over the past year due to the high demand for temporary and part-time staffing because many businesses are struggling to find qualified workers. 

In recent weeks, the stock gapped up to new highs following a very strong Q2 earnings report and since then has continued trending higher. In Q2, RHI had earnings growth of more than 100% and topped consensus earnings by more than 25%. Q3 guidance for revenue and earnings was also above expectations. 

While the stock has been a big gainer, its valuation remains reasonable with a forward P/E of 19.7 which is cheaper than the S&P 500’s forward P/E of 22. The company also has above-average margins which have been expanding in recent quarters. 

The POWR Ratings are also bullish on the stock as it has a B rating which translates to a Buy. The POWR Ratings are calculated by evaluating stocks across 118 different factors, each with its own weight. It’s not surprising that RHI has an A for Quality considering it is one of the top staffing stocks. To see more of RHI’s POWR Ratings, click here.

ManpowerGroup (MAN).

MAN is a provider of workforce solutions and services. Its segments include America, Southern Europe, Northern Europe, Asia Pacific Middle East, Right Management and Corporate. The company offers recruitment services, including permanent, temporary, and contract recruitment of professionals, as well as administrative and industrial positions under the Manpower and Experis brands.

As a staffing company, MAN will benefit from a strong and tight labor market as there will be increased competition for workers. This is already evident through measures like the QUITS ratio, the number of job openings, anecdotes about understaffing, and rising wages. Thus, the demand for MAN’s services should increase, leading to increased revenue and pricing power. 

It’s also showing up in its earnings report as the company topped expectations on the top and bottom-line. Analysts were looking for EPS of $1.45, while the company delivered $2.02 per share, more than a 100% improvement from last year’s Q2. Revenue also topped expectations by 2% and was 41% higher than last year. Q3 guidance also came in above analysts’ forecast. 

MAN has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The stock has an A for Growth which makes sense given its year over year improvements. Click here to see the additional POWR Ratings for MAN including Value, Momentum, Stability, Sentiment, Industry, and Quality.

MAN shares were unchanged in premarket trading Wednesday. Year-to-date, MAN has gained 37.42%, versus a 19.54% rise in the benchmark S&P 500 index during the same period.

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of POWR Growth newsletter. Learn more about Jaimini’s background, along with links to his most recent articles.

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