The U.S. economy has been slowly rebounding from the financial crisis, with higher levels of GDP and job growth, including an estimated 236,000 jobs added to the nation’s employment rolls in February. While an increase in the overall workforce has benefited all recruitment companies, the ones that have innovative platforms and strong relationships with hiring firms have gained the most. With the Federal Reserve unwilling to end its money printing activities until the unemployment rate falls to 6.5%, the recruitment industry should be able to continue growing their sales. So, which recruiters are worth a look?
As its name suggests, AMN Healthcare Services, Inc. (NYSE:AHS) focuses its recruitment and placement services on the diversified healthcare industry, an area that consumes almost 20% of the nation’s economic output. The company primarily provides temporary nurse staffing through local offices around the country, as well as providing physician placement to health care facilities on a nation-wide basis. AMN Healthcare has benefited from both major hospitals’ need for temporary staffing and health care professionals’ desire for more flexible work arrangements.
In FY2012, the company continued to rebound from profit declines during the financial crisis, with increases in revenues and operating income of 7.5% and 41.7%, respectively, versus the prior year. The profit improvement was caused by a 10% increase in the number of professionals that AMN Healthcare placed with clients, as well as strong pricing for its services. In addition, major health care providers are increasingly using a single-source provider for their comprehensive staffing needs, a trend that benefits large providers like AMN Healthcare.
Looking ahead, the company is forecasting further growth in 2013, due to the estimated 30 million additional people that will utilize the health care system as federal health care reform is fully implemented. The rising population of senior citizens will also consume a greater amount of non-acute care services, an area that AMN Healthcare has moved into recently. The company should also benefit from an expected shortage of health care workers that will create demand for temporary staffing services and rising sales for the company.
On Assignment, Inc. (NYSE:ASGN) has similarly gained from consistently high demand for health care services, an area that was the company’s initial focus. The company has grown slowly since its founding in 1985, operating through over 190 offices in the U.S. and selected international markets. However, On Assignment made a big bet in 2012 with the $611 million acquisition of Apex Systems, a major provider of staffing services to technology firms.
In FY2012, On Assignment, Inc. (NYSE:ASGN) produced very strong growth, with increases in revenues and adjusted operating income of 107.6% and 125.05%, respectively, compared to the prior year. The company benefited from its purchase of Apex, as well as from 30% organic growth in its legacy business. In addition, On Assignment achieved operating margin improvement as it added almost 700,000 contract professionals to its national operating network. Looking forward, the company is expecting further growth in 2013 and beyond as its core technology, health care, and life sciences customers continue to grow and add temporary workers.
Founded in 2003, LinkedIn Corp (NYSE:LNKD) is the world’s largest professional online network, with over 200 million members in 200 countries. The company is the ultimate recruiting environment, allowing its users to create profiles, share knowledge, and find job or business opportunities. Much like social network Facebook, LinkedIn provides free basic services in order to create a critical mass of users that will enhance the company’s overall value.
In FY2012, LinkedIn Corp (NYSE:LNKD) enjoyed another year of torrid growth, with increases in revenues and adjusted operating income of 86.2% and 125.9%, respectively, versus the prior year. The company benefited from a 50% rise in its monthly unique users, as well as the introduction of local websites in various international markets. In addition, LinkedIn’s profitability reached the highest level of the past five years, as the company reported a 78% membership increase in its high-margin corporate solutions segment.
Looking ahead, LinkedIn Corp (NYSE:LNKD) is hoping to expand beyond the recruitment market by providing an online channel for salespeople’s marketing efforts. The company recently purchased SlideShare, one of the world’s largest providers of technology to upload and share presentations among a user base. Combined with the company’s sales navigation product, LinkedIn Corp (NYSE:LNKD) is providing access to future sales opportunities, further enhancing the company’s value to its user base.
The recruitment industry is poised for another year of growth as a prime beneficiary of the federal government’s stimulus activities. These three companies have each put themselves in a good operating position through strong relationships with their customer base. While all three are currently priced at premium valuations, investors need to put these winners on their watchlist.
The article These Recruiters are Delivering for Investors originally appeared on Fool.com and is written by Robert Hanley.
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