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Kelly Services Shares Look Cheap to Paul Price

Temporary work company has been hard hit during covid.
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As regular readers will know, one of Paul Price’s most consistent strategies is to look for good companies hit by bad trading. These are the stocks that have dipped in price while the underlying business hasn’t actually lost any of its fundamental value. When that happens, savvy traders can buy it at a discount and hold it for long term value.

Price thinks he’s found just such an opportunity in Kelly Services  (KELYA) - Get Kelly Services, Inc. Class A Report.

“Temporary help agency Kelly Services (KELYA) experienced down years in both 2020 and 2021 due to Covid-related business interruptions,” Price wrote recently on Real Money. “2022 and beyond, though, appear set to show major improvement, paving the way for excellent year-over-year comparisons, which should reignite investor interest in the company's shares.”

Kelly shares “fetched from at least $23 to north of $32 per share during each of the past six years. Exclude the momentary Covid-panic bottom and the shares have rarely been cheaper on forward estimates than they were at year-end 2021.”

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In addition “Kelly is totally debt-free and held about $2.80 per share in net cash and receivables less accounts payable as of Oct. 3, 2021. It has no defined benefit pension plan to deal with and no preferred shares.”

As a result “that leaves plenty of free cash flow for additional share buybacks and future dividend increases. At last year's closing quote of $16.77, the current yield is now 1.19%, just 10% or so of trailing EPS.”

There are no guarantees in life or trading, but those numbers suggest a business which continues to thrive while investors sell its stock for unrelated reasons. Price likes how that could set KELYA up for a bounceback in the coming year.

“To me, $23.75 seems like a relatively conservative price target for January 2023. By past standards that is far from an upper limit.”

Get more trading strategies and investing insights from the contributors on Real Money.