If I had to pick just one
As much as I like Robert Half, if I had to pick one staffing business in this market it likely wouldn’t be one that focused on temporary business.
When recessions hit, I actually prefer temp business. Management positions are cut during recessions, and corporations like the flexibility that temporary placements offer for non-executive positions. But when things turn around executives are needed, and so are executive search (i.e. “permanent placement”) firms.
So if I had to pick just one business in employment services it’d probably be
Korn/Ferry International (NYSE:KFY). This business specializes in highly skilled permanent placement staffing and consulting. They are “head hunters” with an outstanding reputation of finding executive level talent, in very competitive industries, for hefty fees.
Korn/Ferry International (NYSE:KFY) is also coming off of another strong quarter, with EPS growth of 14% and sales growth of 20%. Revenue has increased double digits in each of the past two years, and margins increased 6% for Korn/Ferry International (NYSE:KFY) last year.
I like that Korn/Ferry International (NYSE:KFY) is also branching out into new employment consulting services, because they work in tandem with their permanent placement offerings. FutureStep, one of Korn/Ferry International (NYSE:KFY)’s fastest moving business units offers RPO (recruitment process outsourcing) consulting. What makes this an acceptable growth avenue for Korn/Ferry International (NYSE:KFY) is that RPO services are very low-overhead, high-margin, services just like Executive Search.
It all fits, and it all is absent of the risks associated with temporary staffing.
If you’re interested in the stock you’ll want to check the different service offerings listed on their websites, as well as their nifty new acquisition of a recruiting software firm. But rest assured, this is the best and most trusted name in the world of “head hunting,” and I doubt that any new growth avenues will take their focus off of that.
The best of the best
There’s an important advantage that executive search firms hold over temporary staffing businesses, and it comes down to management. While Korn/Ferry has to do all of the upfront recruiting that a Manpower or Robert Half must do, once the placement is made they are free of any risk.
Korn/Ferry recruits candidates; Manpower and Robert Half recruit and manage candidates. Anything can happen once that placement is made.
So while I find Robert Half and Korn/Ferry equally impressive in their respective spaces, I think Korn/Ferry makes for a better stock pick at this stage.
Adem Tahiri has no position in any stocks mentioned. The Motley Fool recommends Robert Half International. Adem is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Staffing Stocks Have Defied Jobs Numbers…What’s Next? originally appeared on Fool.com is written by Adem Tahiri.
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