Our first recommendation today is an industrial business that beat estimates by a penny last quarter, and our second selection is a sell for a footwear retailer as a result of downward pressure on its sector.
Buy: Korn Ferry International (KFY)
From Upside
Executive-search firm Korn Ferry International (KFY) should benefit from improving labor markets and cutbacks at human-resources departments, helping drive demand for staffing agencies.
Operating in 37 countries, the company executed 8,480 recruitment assignments in fiscal 2015 ended April. A growing and well-heeled client list helps sustain growth—Korn Ferry has partnered with 94% of Fortune 100 companies over the past three years.
With its debt-free balance sheet, generous cash flow, and strong market position, Korn Ferry could attract the eye of a suitor. Rising analyst estimates project 8% per-share profit growth in fiscal 2016 ending April, followed by 10% growth in fiscal 2017. The stock trades at a reasonable 17 times estimated 2016 earnings, or 14 times excluding the company’s net cash position of $5.93 per share.
A standout in the industrial sector, Korn Ferry is a Best Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, November 2, 2015