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It's been a good week for Kforce Inc. (NASDAQ:KFRC) shareholders, because the company has just released its latest third-quarter results, and the shares gained 9.8% to US$38.77. The result was positive overall - although revenues of US$365m were in line with what the analysts predicted, Kforce surprised by delivering a statutory profit of US$0.89 per share, modestly greater than expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Kforce after the latest results.
Taking into account the latest results, Kforce's six analysts currently expect revenues in 2021 to be US$1.40b, approximately in line with the last 12 months. Per-share earnings are expected to rise 5.9% to US$2.61. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.38b and earnings per share (EPS) of US$2.50 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.
The consensus price target rose 7.5% to US$39.50, suggesting that higher earnings estimates flow through to the stock's valuation as well. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Kforce analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$37.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Kforce's rate of growth is expected to accelerate meaningfully, with the forecast 1.1% revenue growth noticeably faster than its historical growth of 0.6%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 8.0% next year. So it's clear that despite the acceleration in growth, Kforce is expected to grow meaningfully slower than the industry average.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Kforce's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Kforce's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Kforce analysts - going out to 2022, and you can see them free on our platform here.
It is also worth noting that we have found 4 warning signs for Kforce that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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