Investors interested in Staffing Firms stocks are likely familiar with Kelly Services (KELYA) and Robert Half (RHI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Kelly Services has a Zacks Rank of #1 (Strong Buy), while Robert Half has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that KELYA is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
KELYA currently has a forward P/E ratio of 10.78, while RHI has a forward P/E of 24.60. We also note that KELYA has a PEG ratio of 0.83. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RHI currently has a PEG ratio of 5.97.
Another notable valuation metric for KELYA is its P/B ratio of 0.65. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RHI has a P/B of 4.50.
These metrics, and several others, help KELYA earn a Value grade of A, while RHI has been given a Value grade of C.
KELYA has seen stronger estimate revision activity and sports more attractive valuation metrics than RHI, so it seems like value investors will conclude that KELYA is the superior option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
