Kforce (KFRC)

Professional staffing firm Kforce (NYSE:KFRC) reported Q4 CY2025 results exceeding the market’s revenue expectations, but sales fell by 3.4% year on year to $332 million. Guidance for next quarter’s revenue was better than expected at $328 million at the midpoint, 2% above analysts’ estimates. Its GAAP profit of $0.30 per share was 35.6% below analysts’ consensus estimates.

Company Overview

With nearly 60 years of matching skilled professionals with the right opportunities, Kforce (NYSE:KFRC) is a professional staffing company that specializes in placing technology and finance experts with businesses on both temporary and permanent bases.

The Professional Staffing & HR Solutions subsector within Business Services is set to benefit from evolving workforce trends, including the rise of remote work and the gig economy. With companies casting a wider net to find talent due to remote work, the expertise of staffing and recruiting companies is even more valuable. For those who invest wisely, the use of predictive AI in recruitment and screening as well as automation in HR workflows can enhance efficiency and scalability. On the other hand, digitization means that talent discovery is less of a manual process, opening the door for tech-first platforms. Additionally, regulatory scrutiny around data privacy in HR is evolving and may require companies in this sector to change their go-to-market strategies over time.

Kforce competes with other professional staffing firms including Robert Half (NYSE:RHI), ManpowerGroup (NYSE:MAN), and Randstad (OTC:RANJY), as well as specialized technology staffing companies like TEKsystems (private) and Insight Global (private).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $1.33 billion in revenue over the past 12 months, Kforce is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Kforce’s demand was weak over the last five years. Its sales fell by 1% annually, a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Kforce’s recent performance shows its demand remained suppressed as its revenue has declined by 6.9% annually over the last two years.

This quarter, Kforce’s revenue fell by 3.4% year on year to $332 million but beat Wall Street’s estimates by 0.8%. Company management is currently guiding for flat sales next quarter.

Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Kforce was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.7% was weak for a business services business.

Analyzing the trend in its profitability, Kforce’s operating margin decreased by 3 percentage points over the last five years. Kforce’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Kforce generated an operating margin profit margin of 2.6%, down 2 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Kforce, its EPS declined by 5.7% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

Diving into the nuances of Kforce’s earnings can give us a better understanding of its performance. As we mentioned earlier, Kforce’s operating margin declined by 3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Kforce, its two-year annual EPS declines of 20.8% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Kforce reported EPS of $0.30, down from $0.60 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Kforce’s full-year EPS of $1.96 to grow 17.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Kforce has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.6%, subpar for a business services business.

Taking a step back, we can see that Kforce’s margin dropped by 1.6 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s in the middle of an investment cycle.

Kforce’s free cash flow clocked in at $4.87 million in Q4, equivalent to a 1.5% margin. The company’s cash profitability regressed as it was 5.1 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Kforce hasn’t been the highest-quality company lately because of its poor revenue and EPS performance, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 32.6%, splendid for a business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Kforce’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Kforce reported $2.14 million of cash and $69.74 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $72.79 million of EBITDA over the last 12 months, we view Kforce’s 0.9× net-debt-to-EBITDA ratio as safe. We also see its $1.56 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

Revenue beat slightly, but EBITDA and EPS both missed meaningfully. While Q1 guidance was solid, it wasn't enough to overcome the EBITDA and EPS misses in the quarter. Zooming out, we think this was a mixed quarter. Investors were likely hoping for more, and shares traded down 11.7% to $32.36 immediately following the results.

Updated: February 2, 2026 at 11:21 PM EST

Before making an investment decision, investors should account for Kforce’s business fundamentals and valuation in addition to what happened in the latest quarter.

Kforce doesn’t pass our quality test. To kick things off, its revenue has declined over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Kforce’s P/E ratio based on the next 12 months is 15.3x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $36.50 on the company (compared to the current share price of $33.62).