Kelly Services, Inc. (KELYA): A Bull Case Theory

We came across a bullish thesis on Kelly Services, Inc. (KELYA) on Substack by Unemployed Value Degen and Value Don't Lie. In this article, we will summarize the bulls’ thesis on KELYA. Kelly Services, Inc. (KELYA)'s share was trading at $13.28 as of April 2^nd. KELYA’s trailing and forward P/E were 16.36 and 6.08 respectively according to Yahoo Finance.

Kelly Services (KELYA) represents a compelling investment opportunity, benefiting from a business transformation that has significantly improved profitability. Historically known as a leading temp agency, Kelly has evolved beyond its traditional model by divesting unprofitable divisions and shifting its focus toward contract employment, which offers higher margins and greater stability. This strategic pivot has led to a notable expansion in adjusted EBITDA margins, rising from 2.3% in 2023 to 3.3% in 2024. While revenues have declined from a peak of $5.0 billion in 2022 to $4.3 billion in 2024, this 14% drop is manageable compared to the broader downturn in the staffing industry. Moreover, key segments within Kelly’s business are thriving, with science, engineering, and technology revenues increasing from 23% to 33% of total sales over the last five years, while education has grown from 5% to 16%. These areas provide resilience in a labor market where white-collar hiring remains sluggish.

Despite improving fundamentals, KELYA remains deeply undervalued. The stock trades at just 0.11x price-to-sales, down from a historical peak of 0.19x. If market sentiment shifts and the company is rerated to past peak multiples, the stock could double in value. However, given Kelly’s fundamental improvements and stronger business mix, there’s a case to be made that its valuation could exceed prior peaks, offering even greater upside. With an aggressive recent selloff in small caps, KELYA presents a rare opportunity for a relatively conservative, high-reward investment. Investors willing to wait for market multiples to catch up to the company’s strengthened fundamentals could see a double in their investment within two years, making KELYA an attractive "base hit" strategy in a volatile market.

While some investors may be drawn to riskier, high-upside plays in the staffing sector, KELYA offers a clear path to strong returns with minimal downside. The company has already completed its transformation, meaning the primary risk lies in market recognition of its improved business model. Unlike competitors struggling with uncertain recoveries, Kelly is positioned for stable, profitable growth. With an entry price of $13.24, a price target of $26 by the end of 2026 appears well within reach.

Kelly Services, Inc. (KELYA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held KELYA at the end of the fourth quarter which was 11 in the previous quarter. While we acknowledge the risk and potential of KELYA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KELYA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.