Financial Analysis: Resources Connection (NASDAQ:RGP) and Korn/Ferry International (NYSE:KFY)

Resources Connection (NASDAQ:RGP) and Korn/Ferry International (NYSE:KFY) are both business services companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.

Insider and Institutional Ownership

93.2% of Resources Connection shares are held by institutional investors. Comparatively, 98.8% of Korn/Ferry International shares are held by institutional investors. 7.9% of Resources Connection shares are held by company insiders. Comparatively, 1.0% of Korn/Ferry International shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and price targets for Resources Connection and Korn/Ferry International, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Resources Connection	2	0	2	0	2.00
Korn/Ferry International	0	1	3	0	2.75

Resources Connection currently has a consensus price target of $6.00, suggesting a potential upside of 18.81%. Korn/Ferry International has a consensus price target of $78.67, suggesting a potential upside of 18.40%. Given Resources Connection’s higher probable upside, analysts plainly believe Resources Connection is more favorable than Korn/Ferry International.

Risk & Volatility

Resources Connection has a beta of 0.49, suggesting that its stock price is 51% less volatile than the S&P 500. Comparatively, Korn/Ferry International has a beta of 1.33, suggesting that its stock price is 33% more volatile than the S&P 500.

Profitability

This table compares Resources Connection and Korn/Ferry International’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Resources Connection	-35.25%	2.11%	1.54%
Korn/Ferry International	9.21%	14.53%	7.35%

Earnings & Valuation

This table compares Resources Connection and Korn/Ferry International”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Resources Connection	$551.33 million	0.31	-$191.78 million	($5.72)	-0.88
Korn/Ferry International	$2.76 billion	1.26	$246.06 million	$4.93	13.48

Korn/Ferry International has higher revenue and earnings than Resources Connection. Resources Connection is trading at a lower price-to-earnings ratio than Korn/Ferry International, indicating that it is currently the more affordable of the two stocks.

Dividends

Resources Connection pays an annual dividend of $0.28 per share and has a dividend yield of 5.5%. Korn/Ferry International pays an annual dividend of $1.92 per share and has a dividend yield of 2.9%. Resources Connection pays out -4.9% of its earnings in the form of a dividend. Korn/Ferry International pays out 38.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Korn/Ferry International has increased its dividend for 5 consecutive years. Resources Connection is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Korn/Ferry International beats Resources Connection on 13 of the 17 factors compared between the two stocks.

About Resources Connection

Resources Connection, Inc. provides consulting services to business customers under the Resources Global Professionals name in North America, Europe, and the Asia Pacific. The company offers services in the areas of transactions, including integration and divestitures, bankruptcy/restructuring, going public readiness and support, financial process optimization, and system implementation; and regulations, such as accounting regulations, internal audit and compliance, data privacy and security, healthcare compliance, and regulatory compliance. It provides transformations services comprising finance transformation, digital transformation, supply chain management, cloud migration, and data design and analytics. The company was formerly known as RC Transaction Corp. and changed its name to Resources Connection, Inc. in August 2000. Resources Connection, Inc. was founded in 1996 and is headquartered in Irvine, California.

About Korn/Ferry International

Korn Ferry, together with its subsidiaries, provides organizational consulting services worldwide. It operates through four segments: Consulting, Digital, Executive Search, and Recruitment Process Outsourcing (RPO) & Professional Search. The company provides executive search services to recruit board level, chief executive, other senior executive, and general management talent of organizations. It also offers organizational strategy, assessment and succession, leadership and professional development, and total reward services. In addition, the company provides RPO, business project, professional search, and outsource recruiting solutions. Further, the company offers tech-enabled solutions that identify structures, roles, capabilities, and behaviors to drive businesses. It serves public and private companies, and middle market and emerging growth companies, as well as government and non-profit organizations. The company was formerly known as Korn/Ferry International and changed its name to Korn Ferry in January 2019. Korn Ferry was founded in 1969 and is based in Los Angeles, California.