Kelly Services-B

Kelly Services Inc receives a 5-star quantitative star rating, reflecting our opinion that this share class offers a compelling opportunity for investors. The stock currently trades at a 22% discount to our quantitative fair value estimate of $28.54 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's valuation metrics strengthen our estimated fair value. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. For example, the firm's book value yield of 180.0% falls in the top 20% compared with peers globally. The market price is low relative to the book (accounting) value of the company's equity, which contributes to our view that shares are cheap.

The firm's profitability is an additional encouraging factor. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. The firm's sales yield of 741.7%, a core component of profitability, falls in the top 10% globally. This company has a robust ability to generate sales without much capital investment, freeing up more capital to be returned to shareholders in the long run. This characteristic further promotes our favorable price/fair value ratio.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.