KFRC

We rate KFORCE INC (KFRC) as a Hold with a composite score of 56.8/100 at a current price of $25.89. 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 quality (76th percentile) and value (75th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a Narrow Moat rating (54/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. 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.

KFORCE 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 56.8/100 places it at rank #1057 in our full 7,333-stock universe. At $558M in market capitalization, KFORCE INC is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -7% combined with momentum at the 46th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 27% (-32.2pp vs sector) narrow to operating margins of 4% (+0.9pp vs sector) and net margins of 3.2%, yielding a gross-to-net conversion rate of 12%. 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 $25.89, KFORCE INC appears undervalued relative to its fundamentals. Our value factor score of 75/100 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 11.8x (a 50% discount to the sector median of 23.7x), EV/EBITDA of 7.8x (discounted to peers), P/B of 4.2x, P/S of 0.4x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to KFORCE INC. The stock presents a balanced risk profile: significant leverage (193% debt-to-equity) and low beta of 0.59 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (193% debt-to-equity); low beta of 0.59 — while defensive, this may indicate limited upside participation in bull markets; the combination of leverage (193% D/E) and thin margins (3.2% net) amplifies downside risk. 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 63th percentile and quality factor at the 76th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (63th percentile) suggests predictable business dynamics; a 5.17% 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 KFORCE INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 35.2%, and the balance sheet is managed within acceptable parameters (D/E: 193%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; KFORCE INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 5.17% 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, KFORCE INC receives a Hold rating with a composite score of 56.8/100 (rank #1057 of 7,333). Our quantitative framework assigns a Narrow Moat (54/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 62/100.

Our analysis supports a neutral stance on KFORCE 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.