$8.83
$27.17
bear $8.83
base $17.19
bull $27.17
margin of safety $10.00
market price* $15.14
Kelly Services is one of the oldest US staffing companies. Since selling its European staffing operations in January 2024 and buying Motion Recruitment Partners (MRP) in May 2024 for about $432 million, it has been almost entirely a North American business with three segments: Enterprise Talent Management (outsourced and managed workforce programs for large employers), Science, Engineering & Technology (specialist technical staffing, including MRP and Softworld), and Education (substitute teachers and school staff placed with US school districts). Revenue was $4.25 billion in 2025, down from $5.51 billion in 2018, and the first half of 2026 was 8% below the first half of 2025. That decline reflects weaker staffing demand, fewer school placements and the exit from a large contact-center program. Net earnings for the first half of 2026 were $5.5 million, against $24.8 million a year earlier. How we measured earnings. We start from operating cash flow and remove the swings in receivables and payables, which move with the staffing cycle and reverse over time. Because rent payments sit inside those swings, we charge lease costs back separately ($10.9 million in 2025). We also deduct stock compensation and capital spending. GAAP results have been distorted by non-cash charges, and we add these back: goodwill write-downs of $72.8 million in 2024 and $102.0 million in 2025, and a $168.5 million deferred-tax charge in 2025 that produced the reported $254.1 million loss. On that basis, the cash the business produced before interest has ranged from $0.68 per share (2020, the pandemic) and $0.73 (2022) up to $2.14 (2019) and $2.27 (2024). It was $1.74 in 2025. The median across the 2019-2025 cycle is $1.53. We take $1.60 as the normal level for today's business. That sits just above the cycle median and below the two years since the reshaping, because the write-downs show the acquired businesses are earning less than expected. That also matters for amortization: about $0.85 per share of the cash figure comes from adding back amortization of acquired customer relationships, so we credit no growth anywhere and let every case fade after year ten. Near-term path. Cash before interest fell 23% in 2025. First-half 2026 operating cash before working-capital swings was about $40 million, against roughly $51 million a year earlier. Our base case therefore assumes $1.34 per share for 2026, a further 23% decline. It then recovers to $1.60 by 2028, a level the current business has already exceeded in both 2024 and 2025, and stays flat in dollars through 2035. Kelly has a decade-long record of roughly flat per-share cash generation on shrinking revenue, helped by buybacks, so flat is the evidenced path. No revenue growth is credited: the company's growth has come from large, lumpy acquisitions that led to goodwill write-downs in two successive years, and not from a steady, repeatable process. After 2035 the base case shrinks 3% a year for 20 years. The US work opportunity tax credit ended for employees hired after 2025, and the company's $207.3 million of tax-credit carryforwards, which keep cash taxes low today, expire between 2034 and 2045. Higher cash taxes after that point are a known headwind, and the long-run erosion in staffing demand adds to it. Debt. Kelly owed $78.1 million at June 28, 2026, all drawn on its $250 million receivables securitization facility, which now runs to June 22, 2028. Its $150 million revolving credit facility, which runs to May 29, 2029, was undrawn. Debt is about 7% of capital, covenants were met at year-end 2025, and floating-rate borrowing costs are close to our 6% discount rate, so we make no cost-of-debt adjustment. We subtract the full $78.1 million ($2.22 per share) and treat the $24 million of cash as needed to run the business. Bear case: a recession hits staffing demand the way 2020 and 2022 did. Cash before interest falls to $1.20 per share in 2026 and $0.75 in 2027, then recovers only to $1.20 by 2029 and erodes 3% a year as AI and automation cut demand for clerical, contact-center and technical temporary work (risks the company flags itself). After 2035 it falls 8% a year. The business is worth about $11.05 per share ($389 million); less debt, that leaves $8.83 per share. Even the 2027 trough covers interest of roughly $0.23 per share, so refinancing is not the issue in this case. Base case: the path described above. The business is worth about $19.41 per share ($683 million); less debt, $17.19 per share. Bull case: MRP's integration completes and cost cuts stick. Cash before interest returns to $2.20 per share by 2029, close to the $2.14 of 2019 and the $2.27 of 2024, and holds there through 2035 before fading 1.5% a year. The business is worth about $29.39 per share ($1,035 million); less debt, $27.17 per share. Control. In January 2026 Hunt Equity Opportunities bought the founding family trust's 92.2% stake in the voting Class B shares for $106.0 million. The publicly traded Class A shares cannot vote for directors, so outside shareholders depend on the new controlling owner's capital decisions. A letter agreement gives minority holders certain protections on controlling-stockholder transactions for three years. Given that, the company's history of write-downs and the cyclicality of staffing, the margin-of-safety price sits well below the base value. Change from our previous view. Our earlier estimates were $4.60, $13.79 and $27.39. The bear and base values are higher mainly because we now discount every business at the same 6% rate and carry the risk in the cases themselves, and because we now measure earnings before working-capital swings. Against that, we now assume no growth in any case and a fade after 2035, where we previously assumed 3-4% growth continuing indefinitely, which is why the bull value is slightly lower. What would make this wrong: a staffing downturn that runs years longer than any in the last decade, a permanent drop in demand for white-collar temporary staff from AI, or a large debt-funded acquisition under the new controlling owner that repeats the recent write-downs.