There now exists a lack of confidence among employers in the United States due to the anemic recovery from The Great Recession, and the current political turmoil in Washington, DC. In large part, that results from the ineptitude of the political leadership in the United States. Due to this, businesses are hiring more temporary workers, preferring not to make the commitment to more expensive full-time employees due to the economic and political uncertainty in the United States. As demonstrated by the performance of the stock price, companies in the demand labor sector of the staffing industry such as TrueBlue, Inc (TBI) and ManpowerGroup (MAN) are positioned well to continue to prosper in the evolving U.S. economy.
The demand labor market is a $29 billion sector of the $100 billion staffing industry in the United States. As shown by the more than 60% share price rise for TrueBlue this year and over 80% hike for ManpowerGroup, the investment community has been very bullish. The future looks just as positive.
For the next year, the analyst community projects that earnings-per-share will rise by 26.08% for TrueBlue. Quarterly grow, at present, is nearly 20% for both revenues and earnings per share. While TrueBlue is certainly growing well organically, it just bought The Workforce Connection to expand its light industrial line services. TrueBLue just had its buy rating reaffirmed by Deutsche Bank. The target price was raised from $28 to $29. At present, TrueBlue is around $25.80 a share and selling at a discount based on its price-to-sales ratio of 0.70.
Others are situated to do as well as TrueBlue as companies continue hire more project workers due to an unwillingness to take on the higher costs of full-time employees.
Manpower Group is up more than 80% this year. The earnings-per-share are soaring more than 70% this quarter. Despite this, the price-to-sales ratio for ManpowerGroup is just 0.30. Next year, the analyst community expects an 11.80% increase in earnings-per-share for ManpowerGroup.
Like TrueBlue, Labor SMART is another small cap in the demand labor industry. For the third quarter, Labor SMART reported record revenues. Earlier this year, Labor SMART purchased QWIK Staffing Solutions in order to expand into the lucrative Florida workforce industry.
As just one example of how the political leadership will result in more demand for the services of ManpowerGroup, TrueBlue, Labor SMART, and others from the demand labor sector, the retail industry is expected to suffer greatly if there is a U.S. debt default. That will increase the demand for temporary workers, as few will be able to take on the expenses of full-time employees.
In addition, it is easier for entities to utilize temporary demand labor in response to chaos from D.C., rather than professional services from Paychex (PAYX), Robert Half International (RHI), and Cross Country HealthCare (CCRN). Due to the niches of each (human resources/benefits for Paychex, healthcare for Cross Country Healthcare, and legal and accounting for Robert Half International) there is more of a commitment required from the clients due to the professionals involved and the higher costs. A retail client can bring in demand labor help quickly and let it go just as fast. The demand for this was demonstrated by Labor SMART adding over 100 clients in August, alone.
If just ineptitude in Washington, D.C., was the basis for investing, then TrueBlue, ManpowerGroup and others in the demand labor sector would be in for an extended bull market. But the growth and value features of TrueBlue, ManpowerGroup, and Labor SMART prove why this industry has performed so well and should into the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.