Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and poor profit margins.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 15.8%. Since the same quarter one year prior, revenues rose by 12.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, KFRC has a quick ratio of 2.09, which demonstrates the ability of the company to cover short-term liquidity needs.
- KFORCE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KFORCE INC turned its bottom line around by earning $0.32 versus -$0.98 in the prior year. This year, the market expects an improvement in earnings ($1.19 versus $0.32).
- The gross profit margin for KFORCE INC is currently lower than what is desirable, coming in at 31.73%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -2.71% trails that of the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Professional Services industry. The net income has significantly decreased by 234.5% when compared to the same quarter one year ago, falling from $6.12 million to -$8.23 million.