NEW YORK ( TheStreet) -- Kforce (Nasdaq: KFRC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall. Highlights from the ratings report include:
- The gross profit margin for KFORCE INC is currently lower than what is desirable, coming in at 29.90%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 1.80% is above that of the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Professional Services industry and the overall market on the basis of return on equity, KFORCE INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Although KFRC's debt-to-equity ratio of 0.11 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.47, which illustrates the ability to avoid short-term cash problems.
- KFRC's revenue growth has slightly outpaced the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 15.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.