Is the fundamentals of KFORCE Inc. (NYSE: KFRC) good enough to guarantee a purchase given the stock’s recent weaknesses?

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Is the fundamentals of KFORCE Inc. (NYSE: KFRC) good enough to guarantee a purchase given the stock’s recent weaknesses?

It's hard to get excited after watching Kforce (NYSE:KFRC)'s recent performance, when its stock has fallen 16% in the past three months. However, if you keep an eye on it, you may find its main financial metrics look good, which could mean that this could rise over the long term in the long term given how the market usually rewards more resilient fundamentals. In particular, we will focus on KFORCE's ROE today.

Return on equity or ROI is an important factor for shareholders to consider because it tells them the effectiveness of their capital being reinvested. In other words, it reveals the company's success in turning shareholder investment into profits.

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this Fair return formula yes:

Return on equity = Net profit (from continuing operations) ÷ Shareholder equity

Therefore, based on the above formula, the ROE of KFORCE is:

34% = $48 million ÷ $138 million (based on the twelve months ended March 2025).

“Reward” is profits over the past twelve months. One way to conceptualize this is that the company's profit is $0.34 per dollar of shareholder capital.

Check out our latest analysis of KFORCE

So far, we have learned that ROE can measure the effectiveness of a company's profit generation. Based on the amount of profits in which the company chooses to reinvest or “retain”, we can evaluate the company’s ability to generate profits in the future. Generally speaking, other things are equal, with higher growth rates than companies that do not share these attributes, companies with higher equity and profits.

First, we admit that KFORCE has a high ROE. Second, compared with the average ROE reported by 20% of the industry, we also didn't notice us. As you might expect, the 2.5% net income decline reported by KFORCE is not good for us. We think there may be some other factors here that can stop the company from growing. For example, it could be that the company's expenditure ratio is high, or the business is allocated in insufficient capital.

That being said, we compared KFORCE to the industry's performance and were concerned that the industry grew its earnings at 11% over the same 5-year period when the company's earnings shrank.

New York Stock Exchange: KFRC's past earnings growth May 28, 2025

The basis of attaching value to a company is largely related to its revenue growth. Investors need to determine what needs to be determined next is the expected earnings growth or the lack of stock price. By doing so, they will know if the stock is waiting for a transparent blue water or swampy water. Is KFORCE's value reasonable compared to other companies? These three valuation measures may help you decide.

Despite the normal median payment ratio of 45% (i.e., retention rate of 55%), KFORCE’s revenue shrinkage is confusing. Therefore, there may be some other explanations in this regard. For example, a company's business may be deteriorating.

Additionally, KFORCE paid dividends for at least a decade, meaning the company's management was determined to pay dividends, even if it meant that there was little revenue growth. After studying the latest analyst consensus data, we found that the company's future payment ratio is expected to rise to 55% over the next three years. In any case, despite the high expected payment ratio, the company's ROE is not expected to change much.

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Overall, KFORCE does have some positive aspects to its business. Although, even with high returns and high reinvestment rates, we are disappointed that even revenues lack growth. We believe there may be some external factors that may negatively affect the business. That's it, with the latest industry analysts forecasting that analysts expect to see an improvement in the company's revenue growth rate. Are these analysts based on broad expectations for the industry or expectations of the company’s fundamentals? Click here to get our analyst's forecast page.

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This article by Simply Wall ST is essentially general. We provide comments based on historical data, analysts use only unbiased approaches to forecasting, and our articles are not meant to be financial advice. It does not constitute a recommendation to buy or sell any shares, nor does it constitute your target or financial position. We aim to bring you long-term focus analysis driven by fundamental data. Please note that our analysis may not consider the latest price-sensitive company announcements or qualitative materials. Simple Wall ST has no place in any of the stocks mentioned.