Kelly Services, Inc. (NASDAQ:KELY.A), is not the largest company out there, but it saw a decent share price growth of 16% on the NASDAQGS over the last few months. The company is inching closer to its yearly highs following the recent share price climb. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Kelly Services’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Kelly Services

What's The Opportunity In Kelly Services?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Kelly Services’s ratio of 31.78x is trading slightly above its industry peers’ ratio of 27.13x, which means if you buy Kelly Services today, you’d be paying a relatively reasonable price for it. And if you believe Kelly Services should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Kelly Services’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Kelly Services generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Kelly Services. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? KELY.A’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at KELY.A? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?