HQI

We rate HireQuest, Inc. (HQI) as a Hold with a composite score of 57.5/100 at a current price of $12.01. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in value (76th percentile) and stability (65th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (34th percentile) and quality (58th percentile) tempers our overall conviction. We assign a Narrow Moat rating (66/100), Low uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

HireQuest, Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 57.5/100 places it at rank #963 in our full 7,333-stock universe. At $136M in market capitalization, HireQuest, Inc. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (62th percentile), revenue contraction of -2% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 100% (+40.4pp vs sector) narrow to operating margins of 8% (+4.9pp vs sector) and net margins of 8.9%, yielding a gross-to-net conversion rate of 9%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $12.01, HireQuest, Inc. appears undervalued relative to its fundamentals. Our value factor score of 76/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 64.6x (a 172% premium to the sector median of 23.7x), EV/EBITDA of 31.3x (at a premium), P/B of 2.4x, P/S of 4.9x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Low uncertainty rating to HireQuest, Inc.. The company exhibits strong financial stability with a beta of 0.72, conservative leverage (40% D/E), and a stability factor in the 65th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: elevated valuation multiple (P/E 64.6x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 65th percentile and quality factor at the 58th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures; above-average stability (65th percentile) suggests predictable business dynamics; a 2.49% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate HireQuest, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 3.7%, and the balance sheet is managed within acceptable parameters (D/E: 40%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; HireQuest, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 2.49% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, HireQuest, Inc. receives a Hold rating with a composite score of 57.5/100 (rank #963 of 7,333). Our quantitative framework assigns a Narrow Moat (66/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 59/100.

Our analysis supports a neutral stance on HireQuest, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.