Kelly Services (KELYA - Get Report) got a powerful 10% lift from Friday's jobs report. That's only a mild salve in the wound of investors that had seen the stock fall nearly 20% the day before. Kelly had just delivered quarterly results that reflect a still-sobering job market. Operating income fell 25% from a year earlier. And EPS would have been 29 cents were it not for a one-time tax gain, trailing the 42-cent consensus forecast.
At this point in the economic cycle, this is a company in transition. Kelly has seen its revenue mix shift in recent years towards temporary staffing, which carries slim profit margins. The company's permanent placement segment carries much firmer margins. The good news: companies that had been heavily relying on temps are likely to shift their focus back to permanent employment as the broader economy strengthens.Of all the staffing stocks, this may be the best bargain, trading for less than its $18 tangible book value. The dowdy valuation may be the result of overly cautious management guidance. Management said earlier this week that sales in the current quarter will rise only modestly from a year ago. That forecast was issued before Friday's stunning employment surprise. In all likelihood, Kelly Services is positioned to meet or even exceed their current forecast. For long-term investors, it's worth noting that shares of Kelly Services trade for half the levels seen five years ago. Kelly shows up on a list of 8 Stocks With Biggest Upside in Market Rebound.