The global outsourcing industry is experiencing substantial growth due to its cost-efficiency, providing businesses access to skilled labor worldwide. Technological advances and improved global connectivity further facilitate seamless collaboration across borders.

Therefore, investors could consider investing in top outsourcing stocks Pearson plc (PSO), Mitie Group plc (MITFY), and Kforce Inc. (KFRC) for gains this month.

The outsourcing industry is flourishing globally, propelled by AI automation, the increasing emphasis on remote work, and heightened attention to data security. Besides, outsourcing non-core functions allows companies to focus on core competencies, boosting operational efficiency and fostering innovation.

In parallel, the learning services outsourcing sector is experiencing international growth, driven by the demand for cost-effective and scalable training solutions. A particular focus on personalized learning across diverse sectors is emerging, fueled by the necessity for efficient staff development and technological progress.

The global learning services outsourcing market is projected to expand at a CAGR of 5.6% from 2023 to 2030.

In addition, the business landscape is evolving with the growing demand for the Business Process Outsourcing (BPO) sector, driven by efficiency improvements, agility, and a strategic focus on core competencies. Also, cloud computing enhances operational aspects, and concerns about security and intellectual property rights influence outsourcing dynamics.

The global business process outsourcing market is projected to expand at a CAGR of 9.4% from 2023 to 2030.

In today's fast-paced world, recruitment process outsourcing services are crucial for addressing employment needs and bridging skill gaps. These providers enhance efficiency by strategically deploying AI and automation in their processes.

The global recruitment process outsourcing market size is anticipated to grow at a CAGR of 16.1% from 2023 to 2030.

Considering these conducive trends, let’s look at the fundamentals of the three best outsourcing stocks.

Pearson plc (PSO)

Based in London, the United Kingdom, PSO is a global education company with segments covering assessments, virtual learning, English language learning, higher education, and workforce skills, providing educational solutions internationally.

On December 14, PSO announced its plan to expand its generative AI to millions of U.S. college students in key subjects following positive fall semester feedback. The AI study tools, integrated into academic content, aim to enhance learning experiences and will include more titles by Fall 2024, reflecting PSO's commitment to responsibly applying AI in education.

PSO’s trailing-12-month gross profit margin of 48.04% is 35.4% higher than the industry average of 35.5%. Its 11.98% trailing-12-month EBIT margin is 58.1% higher than the 7.58% industry average.

For the six months ended June 30, 2023, PSO reported sales and gross profit of £1.88 billion ($2.38 billion) and £919 million ($1.16 billion), up 5.1% and 11.4% from the previous-year quarter, respectively. The company's adjusted operating profit and EPS grew 56.3% and 13.8% year-over-year to £250 million ($316.39 million) and £25.5, respectively.

PSO’s revenue and EPS are expected to grow 1.7% and 12.7% year-over-year to $4.71 billion and $0.70 for the fiscal year ending December 2023, respectively.

PSO’s shares have increased 20.3% over the past nine months and 18.3% over the past six months to close the last trading session at $12.22.

PSO’s POWR Ratings reflect its positive prospects. 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.

PSO has an A grade for Growth and a B for Stability and Sentiment. Within the A-rated Outsourcing - Education Services industry, it is ranked #11 of 20 stocks.

In addition to the POWR Ratings stated above, one can access PSO’s additional Value, Momentum, and Quality ratings here.

Mitie Group plc (MITFY)

Headquartered in London, the United Kingdom, MITFY is an outsourcing services provider that operates globally across segments like security, cleaning, engineering, and facilities management. Its diverse services cater to sectors including government, defense, healthcare, and public services.

On November 17, MITFY's Transformation Hub in London showcased advanced technology for Facilities Transformation, including AI-driven workplace design and security solutions. The hub highlights data analytics for building efficiency and introduces robotic cleaning technologies for operational and environmental advantages.

MITFY’s trailing-12-month ROTC of 5.53% is 11% higher than the industry average of 4.98%. Its 2.35x trailing-12-month asset turnover ratio is 193.3% higher than the 0.80x industry average.

During the six months, which ended September 30, 2023, MITFY's group revenue and gross profit increased 11.2% and 7.4% from the prior-year quarter to £2.08 billion ($2.64 billion) and £221.90 million ($280.83 million), respectively. The company generated operating profit of £56.80 million ($71.88 million), up 12.5% year-over-year. Moreover, its EPS grew 30.4% from the previous-year quarter to £3.

Analysts expect MITFY’s revenue to rise 9.8% year-over-year to $5.59 billion for the fiscal year ending March 2024.

The stock has gained 41.6% over the past year and 43.2% year-to-date to close the last trading session at $5.09.

MITFY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

It has an A grade for Value and Stability and a B for Growth. Within the A-rated Outsourcing - Management Services industry, it is ranked first among five stocks.

To see MITFY’s additional POWR Ratings for Momentum, Sentiment, and Quality, click here.

Kforce Inc. (KFRC)

KFRC provides professional staffing services in the United States, with segments in Technology; and Finance and Accounting. It offers talent solutions in IT and financial areas, serving diverse industries.

KFRC’s trailing-12-month ROTC of 14.18% is 184.7% higher than the industry average of 4.98%. Its 4.06x trailing-12-month asset turnover ratio is 407% higher than the 0.80x industry average.

In the third quarter ended September 30, 2023, KFRC’s revenue stood at $373.12 million. The company generated net income and adjusted EBITDA of $10.58 million and $29.04 million, respectively. As of September 30, 2023, its total liabilities amounted to $190.81 million, compared to its total liabilities of $209.81 million as of December 31, 2022.

In the fourth quarter of 2023, the company anticipates revenue in the range of $359 million to $367 million, with EPS projected between $0.74 and $0.82. Also, the gross profit margin is estimated to be between 27.2% and 27.4%.

Street expects KFRC’s revenue and EPS to be $361.80 million and $0.78 for the fourth quarter ending December 2023.

KFRC’s shares increased 24.8% over the past year and 24.6% year-to-date to close the last trading session at $68.34.

KFRC’s POWR Ratings reflect a robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has a B grade for Value and Quality. Within the A-rated Outsourcing - Staffing Services industry, it is ranked #8 of 18 stocks.

Click here for KFRC’s additional Growth, Momentum, Stability, and Sentiment ratings.

What To Do Next? 

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.  

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PSO shares were trading at $12.37 per share on Friday morning, up $0.15 (+1.23%). Year-to-date, PSO has gained 12.76%, versus a 25.89% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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