Finding the companies and economic sectors that will grow in 2023 can be difficult. Now is a good time to look for winning stocks for December and his 2023.
The Business Services division offers opportunities, especially in the outsourcing industry, which currently ranks in the top 13% of all Zacks industries.
Let’s take a look at these top three stocks for investors to consider buying into the new year.
Automatic data processing ADP
Zacks Ranks #2 in Sports (Buy) Automated data processing is worth considering in the highest rated outsourcing industry. Revenue forecast revisions for cloud-based human capital management firms increased last quarter.
ADP’s technology solutions include payroll, talent management, human resource management, benefits management and time and attendance management.
The company’s current 23rd fiscal year is expected to see a 16% increase in revenue. His EPS is expected to rise another 12% to $9.09 per share in fiscal 2024. Sales are projected to grow 9% in his 2023 fiscal year, and another 7% in his 2024 fiscal year to $19.23 billion.
Automated data processing stocks are up +5% year-to-date, outpacing the S&P 500 at -18% and the outsourcing market at -5%. Over the past 10 years, including dividends, ADP has risen significantly +545%, outperforming the benchmark and outperforming the Zacks sub-industry +328%.
Image Source: Sachs Investment Research
ADP, which trades at around $258 per share, is trading at a futures profit of 31.8x. This is above the industry average of 14.9 times his, but ADP is a proven industry leader. ADP shares are also trading 13% below his 10-year high of 36.4x and approaching the median of 27.6x.
Additionally, Automatic Data Processing is a Dividend Aristocrat and has raised its dividend for at least 25 consecutive years. ADP’s current annual dividend yield is 1.57%, or $4.16 per share.
Valet Business Service BBSI
Barrett Business Services (BBSI) is the highest-ranked stock on the list at Zacks Rank #1 (strong buy). Barret provides light industrial, administrative and technical employees to a variety of businesses through labor leasing, contract staffing, site management, and temporary staffing arrangements.
Revenue forecast revisions for FY22 and FY23 have increased significantly over the past 90 days.
Earnings for the year are expected to be $6.55 per share, up 31% from $6.30 per share last quarter. Revenue in FY23 is projected to grow another 10%. Sales are expected to increase 12% this year, and another 9% to $8.09 billion in fiscal year 2023.
BBSI shares are up 42% year-to-date, well above benchmarks, and the outsourcing market is down 5%. His BBSI total return over the last decade is +217%, just below the benchmark’s +253% and below Zacks Subindustry’s +328%.
However, the BBSI is trading at 14.9 times futures earnings despite this year’s impressive rise. This is on par with industry averages and below benchmarks. Even better, the BBSI is trading at a 54% discount to his 10-year high of 32.8x, well below the median of 15.4x.
Image Source: Sachs Investment Research
The BBSI recently hit a 52-week high and is currently trading at around $96 per share. BBSI shares are still highly valued and appear somewhat discounted, so it looks like the highs could rise. The average Zachs price target offers a 16% upside. Additionally, BBSI has an annual dividend yield of 1.23%, or $1.20 per share.
Blink’s BCO
To round out the list of business services, Brink’s (BCO) stock is worth a look. Brinks is well known for international transportation of valuables including cash management, secure route-based logistics and payment solutions.
Brinks is down -12% year-to-date, beating its benchmarks but trailing the outsourcing market by -5%. BCO’s 10-year total return of +129% trails the broader market and its Zack Subindustry +336%.
However, if earnings estimates rise, BCO could move up to Zacks Rank #2 (Buy) and rise further. Earnings are up 17% for him this year and are projected to rise another 15% in 2023 to $6.42 per share.
The earnings revision for FY22 is the same as last quarter, but the EPS estimate for FY23 is up 7% over the last 90 days. Sales are up 7% this year and are projected to grow another 8% in fiscal year 2023 to $4.87 billion.
Brink’s valuation also stands out at just 10.3x futures earnings. That’s lower than his industry average of 14.9x and 68% below his 10-year high of 32.3x. BCO is also trading at a 45% discount to an 18x 10-year median.
Image Source: Sachs Investment Research
Brinks has an ‘A’ style score grade for value and an overall VGM grade of ‘A’ as well. BCO stock is up 20% from its high, trading at about $57 a share, with Zacks’ average price target suggesting a 35% gain. BCO also offers a respectable annual dividend yield of 1.39% at $0.80 per share.
Conclusion
These business services stocks look primed for growth heading into 2023, which is unusual for most companies. With an economic slowdown looming, these three stocks are viable options for outperforming the market.
Sachs Names ‘Best Single-to-Double Pick’
Out of thousands of stocks, each of our five Zacks experts picked their favorites to surge +100% or more in the coming months. Out of these five, research director Heraz Mian chose her one with the most explosive advantages.
A little-known chemical company, up 65% from last year, but still cheap. With relentless demand, his skyrocketing earnings forecast for 2022, and a $1.5 billion stock buyback, retail investors are ready to jump in.
The company matches other recent Zacks stock doublings as Boston Beer Company surges +143.0% in just over nine months and NVIDIA surges +175.9% in a year. or may exceed it.
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