Critical Review: Kforce (KFRC) & Kelly Services, Inc. Class A (KELYA)

Kforce (NASDAQ: KFRC) and Kelly Services, Inc. Class A (NASDAQ:KELYA) are both small-cap business services companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, earnings, institutional ownership, profitability, risk, dividends and analyst recommendations.

Volatility & Risk

Kforce has a beta of 1.63, suggesting that its share price is 63% more volatile than the S&P 500. Comparatively, Kelly Services, Inc. Class A has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500.

Dividends

Kforce pays an annual dividend of $0.48 per share and has a dividend yield of 1.4%. Kelly Services, Inc. Class A pays an annual dividend of $0.30 per share and has a dividend yield of 1.3%. Kforce pays out 30.6% of its earnings in the form of a dividend. Kelly Services, Inc. Class A pays out 13.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Kforce and Kelly Services, Inc. Class A, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kforce 0 3 1 0 2.25
Kelly Services, Inc. Class A 0 0 1 0 3.00

Kforce currently has a consensus target price of $26.25, suggesting a potential downside of 23.47%. Given Kforce’s higher possible upside, equities analysts clearly believe Kforce is more favorable than Kelly Services, Inc. Class A.

Valuation & Earnings

This table compares Kforce and Kelly Services, Inc. Class A’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kforce $1.36 billion 0.66 $33.28 million $1.57 21.85
Kelly Services, Inc. Class A $5.37 billion 0.16 $71.59 million $2.20 10.20

Kelly Services, Inc. Class A has higher revenue and earnings than Kforce. Kelly Services, Inc. Class A is trading at a lower price-to-earnings ratio than Kforce, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Kforce and Kelly Services, Inc. Class A’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kforce 2.67% 31.73% 11.04%
Kelly Services, Inc. Class A 1.62% 7.57% 3.68%

Insider & Institutional Ownership

79.1% of Kforce shares are owned by institutional investors. Comparatively, 66.9% of Kelly Services, Inc. Class A shares are owned by institutional investors. 13.3% of Kforce shares are owned by company insiders. Comparatively, 12.1% of Kelly Services, Inc. Class A shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Kforce beats Kelly Services, Inc. Class A on 10 of the 15 factors compared between the two stocks.

Kforce Company Profile

Kforce Inc. provides professional staffing services and solutions in the United States and internationally. It operates through Technology (Tech), Finance and Accounting (FA), and Government Solutions (GS) segments. The Tech segment provides temporary staffing and permanent placement services to its clients primarily in the areas of information technology, such as systems/applications architecture and development, project management, enterprise data management, business intelligence, artificial intelligence, machine learning, network architecture, and security. This segment serves clients in various industries comprising financial services, communications, insurance services, and government sectors. The FA segment offers temporary staffing and permanent placement services to its clients in areas, such as general accounting, business analysis, accounts payable, accounts receivable, financial analysis and reporting, taxation, budget preparation and analysis, mortgage and loan processing, cost analysis, professional administration, outsourced functional support, credit and collections, audit services, and systems and controls analysis and documentation. This segment serves clients in various industries, including financial services, healthcare, and government sectors. The GS segment provides staffing services and solutions to the Federal Government as a prime and a subcontractor. It offers integrated business solutions to its clients in areas, such as information technology infrastructure transformation, healthcare informatics, data and knowledge management and analytics, research and development, audit readiness, financial management, and accounting. Kforce Inc. was founded in 1962 and is headquartered in Tampa, Florida.

Kelly Services, Inc. Class A Company Profile

Kelly Services, Inc., together with its subsidiaries, provides workforce solutions to various industries worldwide. The company operates through three segments: Americas Staffing, Global Talent Solutions (GTS), and International Staffing. It provides trained employees for data entry, clerical, and administrative support roles across various industries; schools with instructional and non-instructional employees; support staff for seminars, sales, and trade shows; assemblers, quality control inspectors, and technicians for electronic assembly; maintenance workers, material handlers, and assemblers for light industrial works; scientists, and scientific and clinical research workforce solutions; engineering professionals across various disciplines, including aeronautical, chemical, civil/structural, electrical/instrumentation, environmental, industrial, mechanical, petroleum, pharmaceutical, quality, and telecommunications. The company also provides IT specialists across various disciplines; creative talent in the spectrum of creative services positions; corporate finance departments, accounting firms, and financial institutions with various levels of financial professionals; and legal professionals, including attorneys, paralegals, contract administrators, compliance specialists, and legal administrators. In addition, it provides chefs, porters, and hospitality representatives; and manual workers and semi-skilled professionals in various trade, non-trade, and operational positions. Further, the company provides centrally delivered staffing for large accounts; contingent workforce outsourcing, recruitment process outsourcing, business process outsourcing, and payroll process outsourcing services; contact center staffing solutions; and legal managed services, as well as executive placement, career transition/outplacement, and talent advisory services. Kelly Services, Inc. was founded in 1946 and is headquartered in Troy, Michigan.

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