Korn/Ferry International - Momentum

Korn/Ferry International (KFY) looks like a serious momentum player. Its share price just jumped to a 2-year high as companies begin to hire out of the recession. With another good quarter in the bag and a bullish growth projection, this Zacks #1 rank stock clears the momentum interview.

What Do They Do?

Korn/Ferry is sort of a hybrid company, half talent agency and half executive recruiting services. The company has been around since 1969 and has a market cap of just over $1 billion.

Korn/Ferry is looking like an early benefactor of the job growth that many analysts are looking for in 2011. The company's share price just jumped to a new multi-year high after its Q2 results came in well ahead of expectations.

Second-Quarter Results

Fee revenue, comprising 95% of the company's total revenue, was up 32% from last year to $185 million. This was the groups sixth consecutive quarter of growth.

Earnings came in at 33 cents, 37% ahead of the Zacks Consensus Estimate, lifting the company's average earnings surprise to 35% over the last three quarters.

That increase in sales hit the bottom line hard, with operating income spiking to $20 million from $2 million last year..

Domestic vs International

Providing some texture to the results, CEO Gary Burnison said that the company is seeing a very two-tiered recovery, with emerging market companies hiring and adding jobs while the more developed, western economy countries maintain a cautious outlook.

Finanacial Profile

With cash and short-term investments of $131 million and no long-term debt, Korn/Ferry also looks strong on the balance sheet.

Estimates

We saw some pretty solid movement in estimates off the good quarter, with the current year up 19 cents to $1.17. The next-year estimate is pegged at $1.37, a bullish 17% growth projection.

Valuation

But in spite of recent gains, the valuation picture still looks reasonable, with a forward PEG (PE/growth) ratio of 1.17.

2-Year Chart

On the chart, shares jumped higher in early December after the company reported another great quarter, hitting a new multi-year high on the news. Although shares could be a little over extended in the short-run, the longer term trend is bullish too. Take a look below.

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Momentum Trader Service.
 
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