ZACKSยท2025-09-29 08:51Core Insights - The Zacks Outsourcing industry is experiencing rising demand for business process outsourcing (BPO) due to its flexibility and cost-effectiveness, alongside increasing cybersecurity risks driving the need for outsourcing solutions [1][5][6] Industry Overview - Outsourcing involves delegating internal operations to external resources to enhance operational efficiency, primarily serving small and medium-sized enterprises [3] - Services offered include HR support, payroll management, benefits administration, retirement planning, and insurance services, allowing businesses to focus on core competencies [4] Current Trends - There is consistent growth in BPO and IT outsourcing, with a long-term outlook indicating that outsourced IT services will encompass a wide range of functions, driven by a shortage of in-house engineering talent [5] - The urgency for robust cybersecurity measures is increasing, with companies focusing on employee training and outsourced cybersecurity services to mitigate risks [6] - Innovations such as IoT, cloud computing, AI, and ML are transforming the outsourcing landscape, improving efficiency and competitiveness [7][8] Industry Performance - The Zacks Outsourcing industry currently holds a Zacks Industry Rank of 35, placing it in the top 14% of 246 Zacks industries, indicating bright near-term prospects [9] - Over the past year, the industry has underperformed compared to the broader Zacks Business Services sector and the S&P 500, declining by 1.9% while the sector and S&P 500 grew by 3.7% and 17.7%, respectively [11] - The industry trades at a forward 12-month price-to-earnings (P/E) ratio of 16.43X, lower than the S&P 500's 23.34X and the sector's 21.4X, indicating a cheaper valuation compared to peers [12] Promising Companies - The Brink's Company (BCO): Provides cash and valuables management services with a 5% organic growth rate in Q2 2025, driven by strong demand for precious metals and successful customer acquisition efforts [13][15] - Barrett Business Services, Inc. (BBSI): A Professional Employer Organization with a record increase of 10,100 worksite employees added year-over-year in Q2 2025, supported by strong client retention and new product adoption [16][17] - Capgemini SE (CGEMY): A consulting company with robust commercial momentum, achieving a book-to-bill ratio of 1.08 in Q2 2025, driven by high-value services in Cloud and Data, and AI [18][20]