The rising prominence of outsourcing hinges on its cost-effectiveness, empowering businesses to strategically allocate resources to core activities. Moreover, the appeal of accessing a diverse global talent pool and enabling round-the-clock operations amplifies its reputation as a dynamic and efficient business strategy.
Against the solid backdrop, this article sheds light on the fundamentals of three sound outsourcing stocks: The Brink's Company (BCO), Perdoceo Education Corporation (PRDO), and Civeo Corporation (CVEO), which appear to exhibit bullish momentum.
However, prior to delving into the intricacies of these stocks for a clearer perspective, let’s briefly examine the industry dynamics.
Outsourcing services are in high demand thanks to their perks, including heightened flexibility, lowered expenses, and elevated service standards. These services empower businesses to realign focus on their core operations, thereby delivering added value to their clientele.
Furthermore, with the integration of Artificial Intelligence (AI) and machine learning into outsourcing practices, businesses can now unlock the power of predictive analytics to anticipate market trends, understand customer behavior, and tackle operational hurdles. This proactive approach not only facilitates informed decision-making but also enables resource optimization for unparalleled efficiency.
Owing to the surging demand and heightened technology advancements, according to Statista, revenue in global Business Process Outsourcing (BPO) is projected to reach a staggering $370 billion this year and further escalate to a remarkable $440 billion by 2028, demonstrating a 4.4% CAGR spanning 2024 to 2028.
Meanwhile, as the demand for personalized learning and affordable, adaptable learning systems continues to rise, educators are increasingly turning to outsourcing. This strategic move aims to enhance learning and development, improve efficiency, address skill shortages, and lower costs. Forecasts suggest that the global learning services outsourcing market will grow at a steady CAGR of 5.6% from 2024 to 2031.
Keeping all these factors in mind, let’s now examine the fundamentals of the featured outsourcing stocks in detail:
The Brink's Company (BCO)
BCO provides secure transportation, cash management, and other security-related services internationally. The company offers armored vehicle transportation of valuables, such as cash replenishment, cash forecasting, cash optimization, ATM remote monitoring, and cash-in-transit services.
On January 18, 2024, BCO declared a quarterly dividend of $0.22 per share, payable to its shareholders on March 1, 2024. The company’s annual dividend of $0.88 translates to a 1.09% yield on the prevailing price level, while its four-year average dividend yield is 1.16%. Its dividend payouts have grown at CAGRs of 13.6% and 7.9% over the past three and five years, respectively.
On November 2, 2023, BCO’s board of directors approved a new share repurchase authorization of $500 million, which is set to expire on December 31, 2025. Mark Eubanks, BCO’s president and CEO, expressed that the decision was made in light of its recent strong performance and optimistic outlook for the future.
Eubanks further noted that the scale of this repurchase program is in line with the anticipated increase in free cash flow generation as they make strides in achieving their strategic objectives. This authorization reflects the company's commitment to returning capital to shareholders, a significant aspect of its capital allocation framework aimed at maximizing shareholder value creation.
For the fiscal third quarter, which ended on September 30, 2023, BCO’s revenue increased 7.9% year-over-year to $1.23 billion, while its non-GAAP operating profit improved 30.7% from the year-ago value to $166 million.
Moreover, during the same quarter, the company’s non-GAAP EPS came in at $1.92, up 39.1% from the prior-year quarter. Also, its adjusted EBITDA rose 21.9% year-over-year to $230.50 million.
The consensus revenue estimate of $1.25 billion for the fiscal fourth quarter (ended December 2023) represents a 4.7% improvement year-over-year. Meanwhile, the consensus EPS estimate of $2.53 for the same period reflects a 20.5% year-over-year surge. Moreover, the company topped its revenue estimates in each of the trailing four quarters, which is promising.
BCO’s shares have surged 17.9% over the past nine months to close the last trading session at $81.03, higher than its 200-day moving average of $74.69 and 100-day moving average of $78.59.
BCO’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, Stability, and Quality. In the B-rated 42-stock Outsourcing - Business Services industry, it is ranked first. Click here to see BCO’s ratings for Momentum and Sentiment.
Perdoceo Education Corporation (PRDO)
PRDO provides postsecondary education through online, campus-based, and blended learning programs in the United States. The company operates in two segments: Colorado Technical University and The American InterContinental University System.
On February 21, 2024, PRDO’s board of directors approved a new stock repurchase program slated to begin on March 1, 2024. Geared toward maximizing shareholder value, this authorization enables the company to repurchase up to $50 million worth of its outstanding common stock.
Additionally, on February 5, 2024, PRDO declared a quarterly dividend of $0.11 per share, payable to its shareholders on March 15, 2024. The company’s annual dividend translates to a 2.59% yield on the prevailing price level, while its four-year average dividend yield is 0.11%.
For the fiscal fourth quarter, which ended on December 31, 2023, PRDO’s total revenue amounted to $147.92 million. During the same quarter, the company’s net income came in at $17.19 million and $0.26 per share, representing increases of 7.7% and 13% year-over-year, respectively.
Moreover, its total current assets stood at $654.96 million, up 13.9% compared to $575.12 million as of December 31, 2022.
Street expects PRDO’s revenue and EPS for the fiscal first quarter (ending March 2024) to come in at $163.32 million and $0.53, respectively. Furthermore, its EPS is projected to improve by 15% per annum over the next five years.
The company has an excellent surprise history, surpassing its revenue and EPS estimates in each of the trailing four quarters.
The stock has jumped 38.5% over the past nine months to close the last trading session at $17.04, which is higher than its 200-day moving average of $15.86.
PRDO’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. Within the 21-stock A-rated Outsourcing - Education Services industry, it is ranked first. Click here to see the other ratings of PRDO for Growth, Momentum, Stability, and Sentiment.
Civeo Corporation (CVEO)
CVEO provides hospitality services to the natural resource industry in Canada, Australia, and the United States. The company develops lodges and villages; and mobile assets, including modular, skid-mounted accommodation, and central facilities that provide short to medium-term accommodation needs.
On February 2, 2024, CVEO declared a quarterly dividend of $0.25 per share, payable to its shareholders on March 18, 2024. The company’s annual dividend translates to a 4.41% yield on the prevailing price level, while its four-year average dividend yield is 0.19%.
On September 12, 2023, CVEO disclosed its entry into a definitive agreement to divest its McClelland Lake Lodge assets to a mining project based in the United States for approximately $36 million.
Bradley Dodson, President & Chief Executive Officer at CVEO, highlighted the solid returns garnered from this asset over the years and conveyed optimism about the enhanced financial flexibility the company would gain from selling this asset, enabling it to pursue growth opportunities and return capital to shareholders while maintaining a robust balance sheet.
In the fiscal third quarter, which ended on September 30, 2023, CVEO’s revenue amounted to $183.57 million, while its operating income increased 48.7% from the year-ago value to $16.04 million.
The company’s attributable net income came in at $9.02 million and $0.61 per share, up 72.7% and 90.6% from the prior-year quarter, respectively. Also, as of September 30, 2023, its total current assets stood at $190.63 million, increasing 24.2% compared to $153.55 million as of December 31, 2022.
Analysts predict CVEO’s revenue for the fiscal fourth quarter (ended December 2023) to come in at $151.12 million, while its EPS for the same quarter is forecasted to rise 79.4% year-over-year. Additionally, the company surpassed its revenue estimates in each of the trailing four quarters, which is impressive.
CVEO’s shares have climbed 15.9% over the past six months to close the last trading session at $22.51, higher than its 200-day moving average of $20.79 and 50-day moving average of $22.42, indicating an uptrend.
It’s no surprise that CVEO has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It has an A grade for Sentiment and a B for Growth, Value, and Quality. In the same 42-stock Outsourcing - Business Services industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have CVEO’s ratings for Momentum and Stability. Get all CVEO ratings here.
What To Do Next?
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BCO shares were trading at $81.35 per share on Friday morning, up $0.32 (+0.39%). Year-to-date, BCO has declined -7.26%, versus a 7.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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