The company's national network of sixty offices, two national recruiting centers, and over two thousand staffing specialists supports their ability to meet the needs of their customers, including 70% of the Fortune 100. Their client centric Knowledge Staffing Model allows for on-demand identification and delivery of top talent through progressive recruiting strategies and advanced technologies.
Kforce Inc. provides professional and technical specialty staffing services and solutions in the United States and internationally. The company operates through Technology (Tech), Finance and Accounting (FA), and Government Solutions (GS) segments. The Tech segment offers temporary staffing and permanent placement services primarily in the areas of information technology, such as systems/applications programmers and developers, senior-level project managers, systems analysts, enterprise data management, and e-business and networking technicians. This segment serves clients in various industries, primarily in healthcare, financial services, and government sectors. The FA segment provides temporary staffing and permanent placement services in the areas of general accounting, business analysis, accounts payable, accounts receivable, financial analysis and reporting, taxation, budget preparation and analysis, mortgage and loan processing, cost analysis professional administrative, credit and collections, audit services, and systems and controls analysis and documentation. This segment serves clients in various industries, primarily healthcare, financial services, and government sectors. The GS segment offers Tech and FA professionals to the Federal Government; and integrated business solutions in the areas of information technology, healthcare informatics, data and knowledge management, research and development, financial management and accounting, and others. Kforce Inc. was founded in 1962 and is headquartered in Tampa, Florida.
(Summary) (Company) (Chart)
3 January 2016
1yr Target $30.43
Payout Ratio 34.28%
1yr Cap Gain 20.37%
1yr Tot Return 22.26%
EPS (ttm) $1.40
EPS next yr $1.78
EPS next 5yr 30.17%
1yr Price Support $53.70
Market Cap $731.10 Mil
Revenues $1.31 Bil
Earnings $40.00 Mil
Profit Margin 3.05%
1yr EarnGR 796.87%
3yr EarnGR 59.30%
5yr EarnGR 54.12%
1yr DivGR 320.00%
3yr DivGR ---
5yr DivGR ---
Quick Ratio 2.10
Current Ratio 2.10
Kfroce is a provider of professional and technical specialty staffing services and solutions. Its corporate headquarters is located in Tampa, Fla., and it has 62 field offices located throughout the US and 1 office in Manila, Philippines. The company was incorporated in 1994 but its predecessor companies, Romac & Associates, Inc. and Source Services Corporation have been providing staffing services since 1962. Subsequent to its incorporation, Kforce completed its Initial Public Offering in August 1995. As of February 24, 2015, there were approximately 175 holders of record.
The company provides its clients with staffing services and solutions through three operating segments: Technology (“Tech”), Finance and Accounting (“FA”) and Government Solutions (“GS”). The Tech segment includes the results of Kforce Global Solutions, Inc. (“Global”), a wholly-owned subsidiary, which has an office in the Philippines. The GS segment is organized and managed by specialty because of the unique operating characteristics of the business.
Our Tech segment provides both temporary staffing and permanent placement services to our clients, focusing primarily on areas of information technology such as systems/applications programmers and developers, senior-level project managers, systems analysts, enterprise data management and e-business and networking technicians. The average bill rate for our Tech segment for 2014 was approximately $68 per hour. Our Tech segment provides service to clients in a variety of industries with a strong footprint in the healthcare, financial services and government sectors. An IT growth update published by Staffing Industry Analysts (“SIA”) during September 2014, states that temporary technology staffing is projected to experience growth of 7% in 2015. We believe the sustained high growth is due to the continuing use of temporary staffing as a solution during uncertain economic cycles, the increasing cost of employment driving the systemic use of temporary staffing, particularly in project-based work such as technology, and an increasing influence of technology in business driving the overall demand for talent in the temporary technology staffing sector. The SIA report also acknowledges that notable skill shortages in certain technology skill sets will continue, which we believe will result in strong future growth in our Tech segment.
Our FA segment provides both temporary staffing and permanent placement services to our 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, credit and collections, audit services, and systems and controls analysis and documentation. Our FA segment provides service to clients in a variety of industries with a strong footprint in the healthcare, financial services and government sectors. The average bill rate for our FA segment for 2014 was approximately $32 per hour. In its September 2014 update, the SIA report indicated that the market for temporary finance/accounting work is expected to expand 5% during 2015.
Our GS segment provides Tech and FA professionals to the Federal Government as both a prime contractor and a subcontractor. The GS contracts are concentrated on customers that we believe are less impacted by sequestration threats, such as healthcare. GS offers integrated business solutions to its customers in areas such as: information technology, healthcare informatics, data and knowledge management, research and development, financial management and accounting, among other areas. Substantially all GS services are supplied to the Federal Government through field offices located in the Washington, D.C. metropolitan area, San Antonio, Texas and Austin, Texas.
Types of Staffing Services
Kforce’s staffing services consist of temporary staffing services (“Flex”) and permanent placement services (“Search”). For the three years ended December 31, 2014, 2013, and 2012, Flex represented 96.2%, 95.5% and 95.3% of total Kforce revenue, respectively.
We target clients and recruits for both Flex and Search services, which contributes to our objective of providing integrated solutions for all of our clients’ human capital needs
We provide our clients with qualified individuals (“consultants”) on a temporary basis when it is determined that they have the appropriate skills and experience and are “the right match” for our clients. We recruit consultants from the job boards, Kforce.com, from social media networks and from passive candidates we identify who are currently employed and not actively seeking another position. Our success is dependent upon our employees’ (“associates”) ability to: (1) understand and acknowledge our clients’ needs; (2) determine and understand the capabilities of the consultants being recruited; and (3) deliver and manage the client- consultant relationship to the satisfaction of both our clients and our consultants. We believe proper execution by our associates and our consultants directly impacts the longevity of the assignments, increases the likelihood of being able to generate repeat business with our clients and fosters a better experience for our consultants, which has a direct correlation to their redeployment.
Flex revenue is driven by the number of total hours billed and established bill rates. Flex gross profit is determined by deducting consultant pay, benefits and other related costs from Flex revenues. Flex associate commissions, related taxes and other compensation and benefits, as well as field management compensation are included in selling, general and administrative expenses (“SG&A”), along with administrative and corporate compensation. The Flex business model involves attempting to maximize the number of consultant hours and bill rates, while managing consultant pay rates and benefit costs, as well as compensation and benefits for our core associates. Flex revenue also includes solutions provided through our GS segment. These revenues involve providing longer-term contract services to the customer primarily on a time-and-materials basis but also on a fixed-price and cost-plus basis.
Our Search business is a significantly smaller, yet important, part of our business that involves locating qualified individuals (“candidates”) for permanent placement with our clients. We primarily perform these searches on a contingency basis; thus, fees are only earned if the candidates are ultimately hired by our clients. The typical structure for search fees is based upon a percentage of the placed individual’s annual compensation in their first year of employment, which is known at the time of placement. We recruit permanent employees from the job boards, from our associates’ networks, social media networks and from passive candidates we identify who are currently employed and not actively seeking another position. Also, there are occasions where consultants are initially assigned to a client on a Flex basis and later are converted to a permanent placement, for which we may also receive a Search fee (referred to as “conversion revenue”).
Search revenues are driven by placements made and the resulting fees billed and are recognized net of an allowance for “fallouts,” which occur when placements do not complete the applicable contingency period. Although the contingency period varies by contract, it is typically 90 days or less. This allowance for fallouts is estimated based upon historical experience with Search placements that did not complete the contingency period. There are no consultant payroll costs associated with Search placements, thus, all Search revenues increase gross profit by the full amount of the fee. Search associate commissions, compensation and benefits are included in SG&A.
I like staffing companies because they fill a need that exists in the business world. As economies improve, companies often need to increase staffing and companies like Kforce make that possible. Assuming they can continue to find skilled professionals, their business should continue to improve as the economy improves.
With a 30% projected earnings increase over the next 5 years, a P/E below 20, and a PEG of .60, this is a company with nice fundamentals. Looking at the weekly chart above, it's obvious that the stock has been moving up in stair steps over the last couple of years. During the first half of 2015 the stock found resistance near $24 but in August it broke out and moved higher. After finding resistance near $28 it has pulled back to prior resistance and found support near $24. It's currently above $25 and probably should have been bought 2 weeks ago, but I expect a smart investor can use this chart to his advantage.
I believe this stock has the potential to increase in value at nearly 30% per year, along with earnings. I also believe its dividend will probably increase similarly over that same time. These are the kinds of numbers that can make an investor wealthy over time.