We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Kelly Services a Suitable Stock for Value Investors?
Read MoreHide Full Article
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Kelly Services, Inc. (KELYA - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Kelly Services has a trailing twelve months PE ratio of 14.9, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares quite favorably with the market at large, as the PE for the S&P 500 stands at about 24.7. However, if we focus on the long-term PE trend, Kelly Services’ current PE level puts it above its midpoint over the past five years.
Image Source: Zacks Investment Research
The stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 32.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Kelly Services has a forward PE ratio (price relative to this year’s earnings) of just 12.9, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Kelly Services has a P/S ratio of 0.2. This is lower than the S&P 500 average, which comes in at 4.9 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Kelly Services currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Kelly Services a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 3.1, which is better than the industry average of 13.7. Clearly, KELYA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Kelly Services might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of F. This gives KELYA a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>).
Meanwhile, the company’s recent earnings estimates have been mixed at best. While the current-quarter estimate has seen one upward and downward movement each, the current-year estimate has seen two upward and none downward movements over the past two months.
This has had a mixed effect on the consensus estimate. While the current-quarter consensus has dropped 19.4% over the past two months, the current-year estimate has improved 6.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Such mixed analyst sentiments is the reason why the stock has a Zacks Rank #3 (Hold) and it is the reason why we are looking for in line performance from the company in the near term.
Bottom Line
Kelly Services is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (top 18%) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. Also, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report predicting the 7 stocks that will soar highest in the coming month.
Image: Shutterstock
Is Kelly Services a Suitable Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Kelly Services, Inc. (KELYA - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Kelly Services has a trailing twelve months PE ratio of 14.9, as you can see in the chart below:
This level actually compares quite favorably with the market at large, as the PE for the S&P 500 stands at about 24.7. However, if we focus on the long-term PE trend, Kelly Services’ current PE level puts it above its midpoint over the past five years.
The stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 32.3. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Kelly Services has a forward PE ratio (price relative to this year’s earnings) of just 12.9, so we might say that the forward earnings estimates indicate that the company’s share price will likely appreciate in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Kelly Services has a P/S ratio of 0.2. This is lower than the S&P 500 average, which comes in at 4.9 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, Kelly Services currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Kelly Services a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio (another great indicator of value) comes in at 3.1, which is better than the industry average of 13.7. Clearly, KELYA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Kelly Services might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of A and a Momentum Score of F. This gives KELYA a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>).
Meanwhile, the company’s recent earnings estimates have been mixed at best. While the current-quarter estimate has seen one upward and downward movement each, the current-year estimate has seen two upward and none downward movements over the past two months.
This has had a mixed effect on the consensus estimate. While the current-quarter consensus has dropped 19.4% over the past two months, the current-year estimate has improved 6.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Kelly Services, Inc. Price and Consensus
Kelly Services, Inc. price-consensus-chart | Kelly Services, Inc. Quote
Such mixed analyst sentiments is the reason why the stock has a Zacks Rank #3 (Hold) and it is the reason why we are looking for in line performance from the company in the near term.
Bottom Line
Kelly Services is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (top 18%) further supports the growth potential of the stock. However, with a Zacks Rank #3, it is hard to get too excited about this company overall. Also, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.