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Mangeet Kaur Bouns

3 Outsourcing Stocks to Watch for Prosperous December Gains

Given numerous benefits like cost-effectiveness, flexibility, operational efficiency, and global expansion, business process outsourcing (BPO), recruitment process outsourcing (RPO), and educational services outsourcing services will likely witness growing demand among companies across end-use industries, propelling the outsourcing sector’s growth.

Amid this backdrop, fundamentally sound outsourcing stocks Pearson plc (PSO), Genpact Limited (G), and ZipRecruiter, Inc. (ZIP) could be ideal investments this month for substantial returns.

The BPO services, being the primary outsourcing sector segment, continues to experience high demand across various end-use industries, including healthcare, IT, communications & media, financial services, and retail in the United States and globally.

The growing focus of enterprises on boosting efficiency and organizations’ agility, lower operating costs, and enhanced service quality to survive the constantly evolving business dynamics propels the BPO market’s growth. Moreover, the market allows businesses to refocus on their core activities to provide incremental value to their customers.

The global business process outsourcing market is expected to reach $525.20 billion by 2030, growing at a CAGR of 9.4% during the forecast period. The COVID-19 pandemic further boosted the demand for standardized platform services that provide BPOs to resolve complex business processes, creating avenues for market growth.

IT has emerged as a critical strength for most businesses; therefore, the IT outsourcing market has progressed significantly recently. The IT outsourcing services include application development, software support and maintenance, data management, and other processes. The global IT outsourcing market is expected to expand at a CAGR of 9.3% between 2023 and 2031.

Moreover, the rising need for cost-effective and efficient recruiting processes and robust demand for high-quality talent across several industries are key factors driving the RPO industry’s profitability and expansion. The rapid adoption of advanced technologies such as AI, machine learning, and predictive analytics in recruitment processes will drive the industry’s growth.

The global recruitment process outsourcing market is projected to total $36.07 billion by 2032, registering a CAGR of 17%.

The education services outsourcing industry is growing considerably, with the significance of these services stemming from the fact that they help companies save money while still delivering quality training and development programs to their employees.

As per a report by Cognitive Market Research, the global learning services outsourcing market is estimated to grow at a CAGR of 5.6% from 2023 to 2030.

Given the industry’s robust outlook, investing in best-performing outsourcing stocks PSO, G, and ZIP could be wise in December.

Let’s discuss the fundamentals of these stocks in detail:

Pearson plc (PSO)

Based in London, United Kingdom, PSO provides educational courseware, assessments, and services internationally. The company operates through five segments: Assessment & Qualifications; Virtual Learning; English Language Learning; Higher Education; and Workforce Skills.

On December 11, PSO and its Pearson VUE business, the company’s certification and licensure arm, announced it had joined the White House National Cyber Workforce and Education Strategy to address the immediate requirement for more cyber professionals in the U.S. workforce.

Pearson VUE will provide its IT Specialist, Cybersecurity training resources, and certification exams at no charge as part of its commitment. The program aims to upskill and certify the certification seeker in preparation for their professional path.

On November 15, PSO and Forage, a platform dedicated to helping students get jobs with the world’s top employers, announced a partnership to embed job simulations into Pearson’s MyLab courseware platform and in Pearson+. This first-of-its-kind partnership is aimed at helping students attain skills and explore career prospects while pursuing their studies.

During the third quarter which ended September 30, 2023, the company’s total revenue, excluding OPM and Strategic Review businesses, grew 3%, with a significant increase of 21% in revenue from English Language Learning. Pearson VUE revenue was up 11%, driven by solid performance in IT and healthcare, alongside the commencement of new contracts.

For the first half that ended June 30, 2023, PSO’s sales grew 5.1% year-over-year to £1.88 billion ($2.36 billion). The company’s adjusted operating profit increased 56.2% from the year-ago value to £250 million ($313.78 million). Its adjusted earnings per share were £25.6p, up 13.8% from the prior year’s period.

Additionally, the company’s operating cash flow grew 777.8% year-over-year to £79 million ($99.15 million).

The company updated its full-year guidance for 2023. The Group revenue growth, excluding OPM and Strategic Review businesses, is expected to be at the higher end of the low to mid-single-digit range it has been guided to. Group adjusted operating profit guidance upgraded by c.£20 million ($25.10 million) to £570 million ($715.42 million) - £575 million ($721.69 million).

Analysts expect PSO’s revenue and EPS for the fiscal year (ending December 2023) to increase 1.7% and 13.7% year-over-year to $4.71 billion and $0.70, respectively. Further, for the fiscal year 2024, the company’s revenue and EPS are expected to grow 1.6% and 12.7% year-over-year to $4.78 billion and 0.79, respectively.

PSO’s stock has gained 17.5% over the past six months and 7.9% over the past year to close the last trading session at $12.09.

PSO’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has an A grade for Growth and a B for Stability and Sentiment. Within the A-rated Outsourcing – Educational Services industry, PSO is ranked #12 of 20 stocks.

Click here to access additional ratings of PSO for Momentum, Quality, and Value.

Genpact Limited (G)

Headquartered in Hamilton, Bermuda, G offers business process outsourcing and information technology (IT) services in India, the rest of Asia, North and Latin America, and Europe. The company functions through three segments: Financial Services; Consumer and Healthcare; and High Tech and Manufacturing.

On November 28, Genpact launched an industry-first playbook: FMOps – The Generative AI Imperative for Production. The playbook focuses on Foundation Model Operations (FMOps) and offers practical guidelines for building solid and efficient foundations for generative AI solutions.

“As Generative AI reshapes enterprises across sectors, we continue to find that clients need clear directions for building ethical and scalable generative AI solutions,” said Sreekanth Menon, Global AI/ML Services Leader, Genpact.

On November 23, Genpact announced the opening of the Genpact Artificial Intelligence (AI) Innovation Center in London. The center is designed for co-innovation in association with clients and unlock business transformation using AI beyond productivity in various areas such as supply chain management, finance and accounting, customer care, etc.

With Genpact's deep AI expertise and experience, the center aims to bridge the challenges and opportunities AI brings to businesses.

In the third quarter, which ended on September 30, 2023, G’s net revenue grew 2.2% year-over-year to $1.14 billion. The company’s gross profit increased 2.3% from the year-ago value to $402.83 million. The company’s net income was $117.59 million, up 22.7% from the prior year’s quarter.

In addition, G’s adjusted income from operations came in at $194.94 million, an increase of 3.3% year-over-year. The company’s adjusted EPS grew 1.3% year-over-year to $0.76.

The company’s solid third-quarter performance gives it the confidence to reaffirm its full-year 2023 outlook. G expects a total revenue of approximately $4.45 billion, up 2% year-over-year or 2.5% year-over-year on a constant currency basis. Its adjusted income from operations margin is estimated to grow about 17%, up from the prior expectation of 16.8%.

Further, the company now expects adjusted EPS of $2.89 for the full year.

Street expects G’s revenue and EPS for the fourth quarter (ending December 2023) to increase 2.9% and 5.3% year-over-year to $1.13 billion and $0.74, respectively. Also, the company has topped the consensus EPS estimate in all four trailing quarters, which is remarkable.

Shares of G have surged 9.1% over the past month to close the last trading session at $34.75.

G’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

G has a B grade for Value and Quality. It is ranked #9 out of 41 stocks in the B-rated Outsourcing – Business Services industry.

In addition to the POWR Ratings we’ve stated above, we also have G ratings for Growth, Momentum, Stability, and Sentiment. Get all G ratings here.

ZipRecruiter, Inc. (ZIP)

ZIP provides a marketplace for connecting job seekers and employers. The company’s platform functions in a two-way marketplace, allowing employers to post jobs and access other features, and where job seekers can apply for employment with a single click.

On November 2, ZIP launched a new research site for its economic research, known as ZipRecruiter-Research.org. This newly launched site offers commentary and analysis from its team of economists and data scientists on the latest labor market data. It also features insights from the company’s marketplace data and quarterly surveys.

With the new economic research site for labor market data, the team aims at delivering insights that can drive informed decision-making for job seekers, employers, and policymakers alike.

On August 16, ZIP announced a technology partnership with UKG, a leading HR, payroll, and workforce management solutions provider. This partnership entails enterprise hiring, and with this, ZIP added another top player to its roster of over 200 available human capital management (HCM) suites and applicant tracking system (ATS) integrations.

The integration will enable organizations to streamline workflows with their ATS of choice, provide access to millions of job seekers weekly, accelerate the time-to-hire, and improve the quality of candidates in the pipeline.

In the third quarter that ended September 30, 2023, ZIP’s income from operations rose 10.8% from the year-ago value to $32.67 million. Its income before income taxes grew 33.8% year-over-year to $30.01 million. Also, the company’s net income came in at $24.08 million and $0.23 per share, increases of 17.1% and 35.3% year-over-year, respectively.

In addition, as of September 30, 2023, the company’s cash and cash equivalents came in at $243.34 million versus $227.38 million as of December 31, 2022.

Street expects ZIP’s EPS to grow 10.3% per annum over the next five years. Moreover, the company has an impressive earnings surprise history as it surpassed the consensus EPS  estimates in all four trailing quarters.

Over the past month, the stock has gained 21.8% to close the last trading session at $13.96.

ZIP’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.

ZIP has an A grade for Quality. The stock has a B grade for Value. It is ranked #7 among 19 stocks within the A-rated Outsourcing – Staffing Services industry.

To see the other ratings of ZIP for Sentiment, Growth, Momentum, and Stability, click here.

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.

2024 Stock Market Outlook >


PSO shares were trading at $12.01 per share on Thursday morning, down $0.08 (-0.66%). Year-to-date, PSO has gained 9.48%, versus a 25.08% rise in the benchmark S&P 500 index during the same period.



About the Author: Mangeet Kaur Bouns


Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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