Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 stocks made the list for top value stocks in the Professional Services industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Professional Services Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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6 Undervalued Professional Services Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Professional Services industry for Tuesday, October 08, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Professional Services industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Kelly Services, Inc.’s Value Grade

Value Grade:

Kelly Services, Inc., together with its subsidiaries, provides workforce solutions to various industries. The company operates through five segments: Professional & Industrial; Science, Engineering & Technology; Education; Outsourcing & Consulting; and International. The Professional & Industrial segment delivers staffing, outcome-based, and permanent placement services providing administrative, accounting, and finance; light industrial; contact center staffing; and other workforce solutions. The Science, Engineering & Technology segment offers staffing, outcome-based, and permanent placement services in the areas of science and clinical research, engineering, technology, and telecommunications specialties. The Education segment provides staffing, permanent placement, and executive search services to pre-K-12 school districts and education organizations. The Outsourcing & Consulting segment offers managed service provider, recruitment process outsourcing, payroll process outsourcing, and executive coaching programs to customers on a global basis that includes its RocketPower brand. The International segment provides staffing, recruitment process outsourcing, and permanent placement services. The company serves customers in the United States, Canada, Mexico, Puerto Rico, France, Switzerland, Portugal, Russia, Italy, rest of Europe, and the Asia-Pacific region. Kelly Services, Inc. was founded in 1946 and is headquartered in Troy, Michigan.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Kelly Services, Inc. has a Value Score of 91, which is considered to be undervalued.

When you look at Kelly Services, Inc.’s price-to-sales ratio at 0.17 compared to the industry median at 1.37, this company has a lower price relative to revenue compared to its peers. This could make Kelly Services, Inc.’s stock more attractive for value investors.

Kelly Services, Inc.’s price-earnings ratio is 15.70 compared to the industry median at 29.30. This means it has a lower share price relative to earnings compared to its peers. This could make Kelly Services, Inc. more attractive for value investors.

Now, let’s assess Kelly Services, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 7.7, when compared to the industry median of 13.8, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Kelly Services, Inc.’s shareholder yield is higher than its industry median ratio of 0.50%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Kelly Services, Inc.’s price-to-book ratio is lower than its industry median ratio of 3.12. This could make Kelly Services, Inc. more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Kelly Services, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Kelly Services, Inc.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 22.20. This could make Kelly Services, Inc. more attractive because the lower P/FCF ratio indicates that Kelly Services, Inc. is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Lucas GC Limited’s Value Grade

Value Grade:

Lucas GC Limited, through its subsidiaries, provides online agent-centric human capital management services based on platform-as-a-service (PaaS) in the People’s Republic of China. Its Star Career and Columbus platforms enables registered users to receive customized job recommendations and work as talent scouts to source suitable candidates for its corporate customers through their social network, as well as receive trainings and other value-added services. The company’s platform provides permanent and flexible employment recruitment services; outsourcing services primarily for technology-related projects to design, develop, and deliver the projects within budget and on time with acceptable quality; information technology services to generate sales leads for its corporate customers; and training services comprising career-related certification programs. In addition, it engages in the media and entertainment business, as well as provides management consulting services. Lucas GC Limited was founded in 2011 and is based in Beijing, China. Lucas GC Limited operates as a subsidiary of HTL Lucky Holding Limited.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Lucas GC Limited has a Value Score of 87, which is considered to be undervalued.

Lucas GC Limited’s price-earnings ratio is 8.3 compared to the industry median at 29.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Lucas GC Limited more attractive for value investors.

Lucas GC Limited’s price-to-book ratio is higher than its peers. This could make Lucas GC Limited less attractive for value investors when compared to the industry median at 3.12.

You can read more about Lucas GC Limited’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

ManpowerGroup Inc.’s Value Grade

Value Grade:

ManpowerGroup Inc. provides workforce solutions and services worldwide. The company offers recruitment services, including permanent, temporary, and contract recruitment of professionals, as well as administrative and industrial positions under the Manpower and Experis brands. It also offers various assessment services; training and development services; career and talent management; and outsourcing services related to human resources functions primarily in the areas of large-scale recruiting and workforce-intensive initiatives. In addition, the company provides workforce consulting services; contingent staffing and permanent recruitment services; professional resourcing and project-based services; and recruitment process outsourcing, TAPFIN managed, and talent solutions. The company was incorporated in 1948 and is headquartered in Milwaukee, Wisconsin.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

ManpowerGroup Inc. has a Value Score of 61, which is considered to be undervalued.

ManpowerGroup Inc.’s price-earnings ratio is 76.2 compared to the industry median at 29.3. This means that it has a higher price relative to its earnings compared to its peers. This makes ManpowerGroup Inc. less attractive for value investors.

ManpowerGroup Inc.’s price-to-book ratio is higher than its peers. This could make ManpowerGroup Inc. less attractive for value investors when compared to the industry median at 3.12.

You can read more about ManpowerGroup Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Pixie Dust Technologies, Inc.’s Value Grade

Value Grade:

Pixie Dust Technologies, Inc. focuses on personal care and diversity, and workspace and digital transformation businesses primarily in Japan. The company offers SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device; VUEVO, a series of directional voice arrival detection devices for individuals with deaf and hard-of-hearing; and kikippa, an acoustic stimulation device functioning as a desk-top speaker. It also provides iwasemi, a sound-absorbing or sound-proofing material for architectural and interior design firms; hackke, a location positioning technology; KOTOWARI, a technology offering spatial analysis data; and magickiri, a planning services and monitoring service, which monitors human behavior and analyzes the customer’s environment on the customer’s behalf. In addition, the company operates Pixie Nest, a membership forum, which hosts meetings and distributes information to facilitate solving social issues. Pixie Dust Technologies, Inc. was incorporated in 2017 and is headquartered in Tokyo, Japan.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Pixie Dust Technologies, Inc. has a Value Score of 82, which is considered to be undervalued.

Pixie Dust Technologies, Inc.’s price-to-book ratio is higher than its peers. This could make Pixie Dust Technologies, Inc. less attractive for value investors when compared to the industry median at 3.12.

You can read more about Pixie Dust Technologies, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Resources Connection, Inc.’s Value Grade

Value Grade:

Resources Connection, Inc. engages in the provision of consulting services to business customers under the Resources Global Professionals (RGP) name in North America, the Asia Pacific, and Europe. The company operates through RGP and Sitrick segments. It provides centralized administrative and finance, marketing, finance, human resources, information technology, payroll, and legal and real estate support services. 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.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Resources Connection, Inc. has a Value Score of 68, which is considered to be undervalued.

Resources Connection, Inc.’s price-earnings ratio is 22.6 compared to the industry median at 29.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Resources Connection, Inc. more attractive for value investors.

Resources Connection, Inc.’s price-to-book ratio is higher than its peers. This could make Resources Connection, Inc. less attractive for value investors when compared to the industry median at 3.12.

You can read more about Resources Connection, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Steel Connect, Inc.’s Value Grade

Value Grade:

Steel Connect, Inc., together with its subsidiaries, provides supply chain services in the United States, Mainland China, Netherlands, and internationally. It offers product configuration and packaging, kitting, and assembly of components and parts into finished goods; and value-added processes, such as product testing, radio frequency identification tagging, product or service activation, language settings, personalization and engraving, multi-channel packaging, and packaging design services. The company provides fulfillment services comprising order management, pick, pack and ship, retail compliance, and demand planning services; and reverse logistics services that simplifies the returns process for retailers and manufacturers, as well as operates a cloud-based e-commerce platform. In addition, it offers warehousing and inventory management services; and software licenses, maintenance, and support services. Further, the company offers its supply chain services to customers in the consumer electronics, communications, computing, medical devices, software, and retail markets. The company was formerly known as ModusLink Global Solutions, Inc. and changed its name to Steel Connect, Inc. in February 2018. Steel Connect, Inc. was incorporated in 1986 and is headquartered in New York, New York.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Steel Connect, Inc. has a Value Score of 99, which is considered to be undervalued.

Steel Connect, Inc.’s price-earnings ratio is 3.3 compared to the industry median at 29.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Steel Connect, Inc. more attractive for value investors.

Steel Connect, Inc.’s price-to-book ratio is higher than its peers. This could make Steel Connect, Inc. less attractive for value investors when compared to the industry median at 3.12.

You can read more about Steel Connect, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Professional Services Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Professional Services stocks as well as other industrys.

Choosing Which of the 6 Best Professional Services Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Kelly Services, Inc. stock has a Value Grade of A.
• Lucas GC Limited stock has a Value Grade of A.
• ManpowerGroup Inc. stock has a Value Grade of B.
• Pixie Dust Technologies, Inc. stock has a Value Grade of A.
• Resources Connection, Inc. stock has a Value Grade of B.
• Steel Connect, Inc. stock has a Value Grade of A.

Now that you have a bit more background about each of the 6 undervalued stocks in the Professional Services industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Professional Services Stocks

Want to learn more about Professional Services stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 6 Undervalued Professional Services Stocks for Tuesday, October 08
• 6 Undervalued Professional Services Stocks for Monday, October 07
• 4 Undervalued Professional Services Stocks for Friday, October 04
• 3 Undervalued Professional Services Stocks for Thursday, October 03

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.