Analyzing Resources Connection (NASDAQ:RGP) and HireQuest (NASDAQ:HQI)

HireQuest (NASDAQ:HQI) and Resources Connection (NASDAQ:RGP) are both small-cap business services companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, analyst recommendations, valuation, institutional ownership, dividends, earnings and risk.

Dividends

HireQuest pays an annual dividend of $0.24 per share and has a dividend yield of 2.3%. Resources Connection pays an annual dividend of $0.28 per share and has a dividend yield of 5.3%. HireQuest pays out 48.0% of its earnings in the form of a dividend. Resources Connection pays out -4.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Resources Connection is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares HireQuest and Resources Connection”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HireQuest	$34.60 million	4.24	$3.67 million	$0.50	20.82
Resources Connection	$551.33 million	0.32	-$191.78 million	($5.72)	-0.92

HireQuest has higher earnings, but lower revenue than Resources Connection. Resources Connection is trading at a lower price-to-earnings ratio than HireQuest, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

12.0% of HireQuest shares are held by institutional investors. Comparatively, 93.2% of Resources Connection shares are held by institutional investors. 43.5% of HireQuest shares are held by company insiders. Comparatively, 7.9% of Resources Connection shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility and Risk

HireQuest has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500. Comparatively, Resources Connection has a beta of 0.51, indicating that its stock price is 49% less volatile than the S&P 500.

Profitability

This table compares HireQuest and Resources Connection’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
HireQuest	21.92%	14.48%	10.15%
Resources Connection	-35.25%	2.11%	1.54%

Analyst Ratings

This is a breakdown of current ratings and target prices for HireQuest and Resources Connection, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HireQuest	1	0	1	0	2.00
Resources Connection	2	0	2	0	2.00

HireQuest currently has a consensus price target of $14.00, indicating a potential upside of 34.49%. Resources Connection has a consensus price target of $6.00, indicating a potential upside of 14.07%. Given HireQuest’s higher possible upside, research analysts clearly believe HireQuest is more favorable than Resources Connection.

Summary

HireQuest beats Resources Connection on 10 of the 15 factors compared between the two stocks.

About HireQuest

HireQuest, Inc. provides temporary staffing services in the United States. It offers staffing services, including direct-dispatch, executive search, consultant, unskilled and semi-skilled industrial and construction personnel, clerical and administrative personnel, and permanent placement services, as well as commercial and non-CDL drivers, and skilled personnel in the medical and dental industries. The company provides its services under the HireQuest Direct, HireQuest, SNelling, DriverQuest, HireQuest Health, Northbound Executive Search, and MRI trade names. It serves construction, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, and retail industries, as well as dental practices. HireQuest, Inc. was founded in 2002 and is headquartered in Goose Creek, South Carolina.

About Resources Connection

Resources Connection, Inc. provides consulting services to business customers under the Resources Global Professionals name in North America, Europe, and the Asia Pacific. The company offers services in the areas of transactions, including integration and divestitures, bankruptcy/restructuring, going public readiness and support, financial process optimization, and system implementation; and regulations, such as accounting regulations, internal audit and compliance, data privacy and security, healthcare compliance, and regulatory compliance. It provides transformations services comprising finance transformation, digital transformation, supply chain management, cloud migration, and data design and analytics. The company was formerly known as RC Transaction Corp. and changed its name to Resources Connection, Inc. in August 2000. Resources Connection, Inc. was founded in 1996 and is headquartered in Irvine, California.