The weak U.S. job market has not been kind to employment agencies, on the whole. At one point or another, virtually every sector felt the impact of the recession of 2007-2009, as heavy job losses were sustained in its aftermath. Although conditions are slightly better now than they were immediately following the downturn, the labor market situation is far from normal. The U.S. unemployment rate continues to hover above 8%, and chances are it won’t decline much by yearend. Yet, while hiring activity has been stagnant in some areas, there have been signs of life in others. That has been a plus for certain job-placement providers, such as On Assignment (ASGN).

Founded in 1985, the California-based recruiter started out as a contract-staffing firm that supplied professionals primarily to the life sciences industry, and has since grown into a more-comprehensive provider of employees on a temporary, project, and permanent basis in three broad categories—technology, healthcare, and life sciences. While the company has certainly not been immune to the ups and downs of the economy and labor market, its expansion into other niche markets over the years has helped shelter it from the turbulence, compared to some of its peers.

Indeed, over the last 27 years, the staffer has made 13 acquisitions, with some playing a key role in its diversification process. One of the most important acquisitions came in 2002, when the company decided to shift its focus from scientific staffing to healthcare staffing with the purchase of Health Personnel Options, a provider of traveling nurses and other temporary healthcare professionals. In a move to further diversify the business, On Assignment made a couple more strategic acquisitions just a few years later, in 2007. Those included Vista Staffing Solutions, a provider of physicians staffing services, and Oxford Global Resources, a provider of IT and engineering placement services. With Oxford in the fold, the company essentially entered into new markets, vastly different from its more traditional scientific and healthcare-related operations.

In 2010, On Assignment snapped up two more privately-held employment agencies, deepening the breadth of its staffing solutions. The Cambridge Group specialized in clinical research, IT, and physician staffing, whereas Sharpstream Holdings, headquartered in London, focused on executive search within the life sciences sector and provided access to markets across Europe, Asia, and the U.S.

The buying streak didn’t end there, however. Last year, the staffer went on to acquire Belgium-based clinical research recruiter Valesta and physician staffing provider HealthCare Partners. Most recently, in May, it completed the acquisition of Apex Systems for $600 million in cash and stock, substantially beefing up the IT staffing side of the business. When news of this deal broke in March, ASGN shares jumped.

From our perspective, the union looks good. With the newcomer on board, On Assignment is now one of the largest job-placement companies out there, and the second largest IT staffing services provider in the United States. Apex’s mid-level staffing business ought to nicely complement ASGN’s existing IT-related offerings, which involve higher-end projects. What’s more, the purchase is consistent with management’s strategy, as it expands the company’s footprint in one of the fastest-growing segments of the professional staffing industry, where demand for IT and engineering professionals is high, but supply is limited. A shortage of these highly-skilled folks puts On Assignment in the driver’s seat, especially in terms of pricing.

The IT staffing market is expected to grow to about $23 billion in 2012. All in all, the deal should contribute meaningfully to results, catapulting total revenues to over $1 billion and profits to new highs beginning this year. Note that at the end of 2011, technology-based revenues comprised about 45% of the top line. With Apex, they are likely to represent about 75%.

This is not to say there won’t be any challenges ahead. In fact, because of its increased exposure to the professional services sector, ASGN will likely face stiff competition from industry heavyweights that provide IT staffing, including global recruiter Robert Half International (RHI), Manpower (MAN), and even computer giant International Business Machines (IBM - Free IBM Stock Report). As well, the IT and engineering businesses are dependent on capital spending by corporate clients.

That said, the company’s strategy of diversifying largely through acquisitions has, thus far, paid off. Tapping fields that tend to be somewhat less economically sensitive, namely healthcare, IT, and engineering, has helped to minimize damage to the bottom line in recent years. Indeed, in large part, we attribute On Assignment’s success in weathering near-term job weakness to its focus on high-margin markets, where the need for skilled, well-paid professionals is sizable. And we think the company stands to benefit from its versatile offerings longer term, too, once employers regain confidence in the economy and the labor market turnaround takes hold.

Based on its growth prospects (including the Apex purchase), On Assignment will likely perform well over the next several years. For a more detailed evaluation of the company’s business and the investment merits of the stock, subscribers should check out our full report.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.