KFY - Embedded Expectations Analysis - 2020 01 30
ï€ Korn Ferry (KFY:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 12.0x Uniform P/E, implying bearish expectations for the firm, but given management's excitement about their brand repositioning and Search business database, and confidence about their portfolio mix and KF Consulting initiatives, market expectations are overly bearish, and equity upside remains warranted for KFYï€ Specifically, management generated multiple excitement markers when saying that one of their key growth levers is to continue to extend and reposition the Korn Ferry brand and that their Search business has one of the most comprehensive organizational and people databases in the world. Moreover, they are confident that their goal is for Marquee and regional accounts to represent 40%-45% of their portfolio and that they are attempting to bring KF Consulting more sizable engagements anchored around business outcomes
ï€ Given management's excitement about their brand repositioning efforts and database and their confidence about their portfolio mix and consulting business, market expectations are far too bearish, suggesting equity upside remains warranted for KFY
Korn Ferry is an organizational consulting firm. The company is engaged in the business of giving client awareness to its range of talent management solutions. The company's segments include: Executive Search, in which the company's services are used to fill executive-level positions, such as board directors, chief executive officers, chief operating officers, chief information officers, chief human resource officers and other senior executive officers; Advisory, which helps clients design their organization and shows them the way to compensate, develop and motivate their people; and RPO and Professional Search, which combines people, process personnel and intellectual property enabled technology.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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