KORN FERRY (KFY) stock intrinsic value fair value estimate & owner earnings analysis

Korn Ferry is a global talent and organizational consulting firm. In fiscal 2026 (the year ended April 30, 2026) it earned $2.91 billion of fee revenue from five businesses: Executive Search ($924 million, the firm's original franchise dating to 1969), Consulting ($692 million, largely the former Hay Group pay and organization practice), Professional Search & Interim ($561 million), Recruitment Process Outsourcing ($367 million) and Digital ($364 million of subscription assessment, pay-data and leadership tools). The business needs very little capital, with capital spending running at about 2-3% of revenue, so most of its profit turns into cash. Its revenue, however, rises and falls with corporate hiring. How we measured earnings. We start from operating cash flow and strip out working-capital swings, which are large here because each year's bonuses are accrued by April 30 and paid in the following quarter. We charge stock compensation and bad-debt expense as real costs, deduct the capital spending needed to keep the business running, and remove the share belonging to minority partners. Korn Ferry's deferred-compensation plans are funded by about $244 million of investments held in trust plus company-owned life insurance; we treat the plans and their funding assets as offsetting, so the trust is not counted as spare cash and the plan obligations are not counted as debt. On this basis owner earnings per share were $3.37 in fiscal 2019, $2.40 in 2020, $2.69 in 2021, $7.21 in the 2022 hiring boom, $4.76 in 2023, $3.69 in the 2024 hiring slump, $5.17 in 2025 and $5.86 in 2026. Adding back the roughly $25 million of annual interest, mostly on its $400 million of notes, gives the cash the business itself generates before paying lenders: $5.65 a share in 2025 and $6.33 in 2026. Starting point. We use the median of fiscal 2022-2026, $5.65 a share before interest. That window begins with the fiscal 2022-2023 acquisitions of Lucas Group, Patina, Infinity Consulting Solutions and Salo that built today's Professional Search & Interim business, and it covers a full hiring cycle: the 2022 boom, the 2024 trough and the recovery since. Earlier years describe a smaller firm. The starting point sits about 11% below the latest year's $6.33, so every case begins from a normal mid-cycle level rather than the latest result. Cash generation per share grew 12% last year; the base case assumes 3% in its first year, from that lower starting point, so it does not assume recent momentum continues. Fee revenue rose 7% in the quarter ended July 31, 2026, which is consistent with, but does not change, that starting point. Base case ($126.93 a share). Cash generation compounds at 3% a year for ten years, from $5.65 to about $7.60 a share. We credit only two drivers we can evidence: search fees are set as a share of the hired executive's first-year pay, so they rise with executive pay, and steady buybacks have cut the diluted share count from 56.9 million in fiscal 2017 to about 51.3 million today. Growth from acquisitions, expansion of Digital and margin gains are left out. After year ten, earnings are held flat with no growth, supported by a search franchise that has come through every downturn for more than 55 years. The business is worth about $122 a share ($6.3 billion); adding about $250 million of net cash ($4.87 a share) gives $126.93. Bear case ($71.45 a share). A hiring recession like fiscal 2020-2021 cuts revenue by about 8% and holds cash generation near $3.90 a share for two years, the roughly 7.5% cash margin seen in the 2020 and 2024 troughs. Afterwards the business settles at about $4.60 a share with no growth. That reflects the fall in revenue from fiscal 2023 to 2025 despite about $300 million spent on acquisitions, and the company's own warning that artificial intelligence may reduce demand for its services as clients and candidates go around it. That level holds for 30 years and then fades to zero over the following decade. The business is worth about $67 a share ($3.4 billion); with net cash the shares are worth $71.45. Bull case ($196.15 a share). The fiscal 2026 level of $6.33 a share proves to be the new mid-cycle level, and cash generation grows 6% a year for ten years from buybacks, pay-linked fee growth and continued small acquisitions paid for from cash, as the company has done repeatedly (Lucas Group, Patina, Infinity Consulting Solutions, Salo and, in fiscal 2025, Trilogy). Growth slows to 2% for the next ten years and then holds flat. The business is worth about $191 a share ($9.8 billion); with net cash, $196.15. Debt and cash. Korn Ferry owes $400 million of 4.625% senior notes maturing December 15, 2027, which were valued close to face at April 30, 2026, and its $850 million revolving credit line, put in place in July 2025, is undrawn. At April 30, 2026 it held $1.38 billion of cash and investments, but the company itself puts the amount left after the deferred-compensation trust and accrued bonuses at $729 million. We count $650 million as truly spare, keeping a cushion to run a business operating in dozens of countries, so net cash is about $250 million. In every case the business covers its interest bill many times over, and refinancing the 2027 notes does not materially affect the outcome. Changes since our previous estimate. In August 2026 we valued the shares at $54-$159 with a base of about $101. Our estimate is higher now mainly because we now discount every case at the same, lower rate and carry risk in each case's own assumptions rather than in higher discount rates. Partly offsetting that, we assume slower growth in every case (3% a year instead of 6% in the base case), and we no longer count cash reserved for employee bonuses and deferred pay as spare, which lowers net cash from about $13.70 to $4.87 a share. What would make this wrong. A long freeze in white-collar hiring, or AI recruiting tools that steadily take work from search and outsourced recruiting, would push results toward the bear case. The base case depends on the 2022-2026 median being a fair mid-cycle level; if the 2024 trough proves typical instead, base value falls to about $95 a share. About $24 million a year of amortization of acquired customer relationships and trade names is added back as a non-cash charge; we have not shrunk earnings for it, because client relationships are continually renewed through everyday search and consulting work, but we have also given no credit for growth from future acquisitions in the base case.