Kelly Services (NASDAQ:KELYB) vs. Resources Connection (NASDAQ:RGP) Financial Review

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

Analyst Recommendations

This is a summary of recent ratings and price targets for Kelly Services and Resources Connection, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kelly Services	1	0	0	0	1.00
Resources Connection	1	0	2	0	2.33

Resources Connection has a consensus price target of $7.00, indicating a potential upside of 85.68%. Given Resources Connection’s stronger consensus rating and higher possible upside, analysts plainly believe Resources Connection is more favorable than Kelly Services.

Insider & Institutional Ownership

0.2% of Kelly Services shares are owned by institutional investors. Comparatively, 93.2% of Resources Connection shares are owned by institutional investors. 93.1% of Kelly Services shares are owned by insiders. Comparatively, 7.9% of Resources Connection shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Kelly Services and Resources Connection”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kelly Services	$4.25 billion	0.13	-$254.10 million	($7.27)	-2.16
Resources Connection	$551.33 million	0.23	-$191.78 million	($2.96)	-1.27

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

Dividends

Kelly Services pays an annual dividend of $0.30 per share and has a dividend yield of 1.9%. Resources Connection pays an annual dividend of $0.28 per share and has a dividend yield of 7.4%. Kelly Services pays out -4.1% of its earnings in the form of a dividend. Resources Connection pays out -9.5% 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.

Volatility & Risk

Kelly Services has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500. Comparatively, Resources Connection has a beta of 0.45, indicating that its stock price is 55% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Kelly Services	-5.98%	4.05%	1.91%
Resources Connection	-20.16%	-0.55%	-0.38%

Summary

Resources Connection beats Kelly Services on 10 of the 16 factors compared between the two stocks.

About Kelly Services

Kelly Services, Inc. engages in staffing and workforce solutions. It operates through the following segments: Americas Staffing, Global Talent Solutions, and International Staffing. The Americas Staffing segment delivers temporary staffing, as well as direct-hire placement services, in a number of specialty staffing services, including office, education, marketing, electronic assembly, light industrial, science, engineering, and information technology in United States, Puerto Rico, Canada, Mexico and Brazil. The Global Talent Solutions segment offers outsourcing, consulting, and centrally delivered staffing business. The International Staffing segment relates to branch-delivered staffing business in the Europe, Middle East, and Africa region, as well as in the Asia Pacific. The company was founded by William Russell Kelly on October 7, 1946 and is headquartered in Troy, MI.

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.