Kforce (KFRC)

Professional staffing firm Kforce (NYSE:KFRC) announced better-than-expected revenue in Q3 CY2025, but sales fell by 5.9% year on year to $332.6 million. On top of that, next quarter’s revenue guidance ($330 million at the midpoint) was surprisingly good and 3% above what analysts were expecting. Its GAAP profit of $0.63 per share was 12.7% above 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 the best consistently grow over the long haul.

With $1.34 billion in revenue over the past 12 months, Kforce is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels.

As you can see below, Kforce struggled to increase demand as its $1.34 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a poor baseline 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 8.1% annually over the last two years.

This quarter, Kforce’s revenue fell by 5.9% year on year to $332.6 million but beat Wall Street’s estimates by 1.5%. Company management is currently guiding for a 4% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 2.8% over the next 12 months. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Kforce was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.9% was weak for a business services business.

Looking at the trend in its profitability, Kforce’s operating margin decreased by 2.7 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 4.5%, in line with the same quarter last year. This 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 1.3% annually over the last five years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences.If the tide turns unexpectedly, Kforce’s low margin of safety could leave its stock price susceptible to large downswings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Kforce, its two-year annual EPS declines of 7.9% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Kforce reported EPS of $0.63, down from $0.75 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Kforce’s full-year EPS of $2.26 to shrink by 6.6%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

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 4.8%, subpar for a business services business.

Kforce’s free cash flow clocked in at $30.14 million in Q3, equivalent to a 9.1% margin. This result was good as its margin was 1.3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

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 34.5%, 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 $1.25 million of cash and $3.23 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 $76.61 million of EBITDA over the last 12 months, we view Kforce’s 0.0× net-debt-to-EBITDA ratio as safe. We also see its $1.33 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.

We were impressed by Kforce’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Looking ahead, revenue guidance for next quarter also exceeded expectations. Zooming out, we think this was a very good print with some key areas of upside. The stock traded up 14.1% to $28 immediately following the results.

Updated: December 4, 2025 at 10:52 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Kforce, you should also grasp the company’s longer-term business quality and valuation.

Kforce doesn’t pass our quality test. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its stellar ROIC suggests it has been a well-run company historically, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its projected EPS for the next year is lacking.

Kforce’s P/E ratio based on the next 12 months is 13.9x. This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $36.88 on the company (compared to the current share price of $29.73).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.